The NASDAQ spiked up the most, jumping 17.4 percent, or 320.28 points. The Dow advanced 6.3 percent, gaining 623.62 points. The S&P 500 rose 5.5 percent, or 64.05 points.
Throughout the quarter, investors were alternately skittish about earnings and the economy and hopeful that business will improve in the second half of the year. They were disappointed Wednesday by the Fed, which lowered interest rates by a quarter point, half the size many on Wall Street wanted.
But after thinking about the Fed's move, analysts said the market saw the smaller cut as a sign that the economy is improving.
"All the economic data over the last few weeks has been better than expected, and that shows a trend that things are getting better ... The Fed didn't cut more because it doesn't have to -- the economy is getting better," said Hogan, the Jefferies analyst.
Hogan said he's encouraged by a string of stronger-than-expected reports, including two that were released Friday.
The Chicago Purchasing Man-agement Association, which is considered a good gauge of business activity across the nation, reported its June index rose to 44.4 from 38.7 in May.
Another positive for the economy came from the University of Michigan's full-month report on consumer sentiment, which was reported to have risen to 92.6 in June from 92 in May.
Advancing issues outnumbered decliners nearly 2 to 1 on the New York Stock Exchange. Consolidated volume came to 1.69 billion shares, compared with 1.55 billion on Thursday.
The Russell 2000 index, which measures the performance of smaller company stocks, rose 9.65 to 512.64.
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