Wall Street rallied to close higher Friday after positive economic data revealing strength in the economy gave investors optimism on the tail end of a week heavy with corporate earnings reports.

The Dow Jones industrial average soared to close higher 172.06 points, or 1.89 percent, at 9,284.57. The Nasdaq Composite was up 29.28 points, or 1.74 percent, at 1,730.70, while the Standard & Poor's 500 index was up 17.08, or 1.72 percent, at 998.68.

Trading was active, with about 1.4 billion shares traded on the New York Stock Exchange and 1.6 billion shares traded on Nasdaq.

For the week, all three main gauges finished higher, with the Dow up 1.1 percent, the Nasdaq up 1.3 percent, and the S&P up 0.5 percent. The Nasdaq and S&P posted their third winning week out of the last four.

A government report showed new orders for costly manufactured goods shot up at the fastest rate in five months during June. Orders for durable goods climbed 2.1 percent, beating forecasts for a 1.0 percent increase, and fueled optimism that an economic recovery is materializing.

In a separate report, the department said sales of new, single-family homes rose at a seasonally adjusted annual rate of 1.16 million units in June, a 4.7 percent increase over May's level. Economists had been predicting a decline.

Meanwhile, a senior U.S. Army officer said at least five of the 13 people captured in a raid in Iraq are believed to be members of Saddam's personal security detail. Maj. Gen. Ray Odierno said it was too early to tell if the guards could help lead Americans to Saddam.

Trading has been choppy in recent days as investors sift through the second-quarter earnings season. Analysts say investors are hoping to find strong evidence that the economy is firmly back on track. Some analysts also said the news out of Iraq helped to fuel Friday's rally.

"The economic data overall has been pretty good. But there's a lot of good and bad earnings reports leading to day-to-day volatility," said Barry Berman, head trader for Robert W. Baird & Co.

Aside from the economic data, Wall Street focused on more earnings from corporate America as the second-quarter reporting season came to a close.

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JDS Uniphase Corp. (JDSU), the world's largest supplier of parts that boost the speed and capacity of fiber optic networks, reported a much smaller fourth-quarter loss and forecast falling sales amid continued weak demand in the communications industry. Its shares sank 9.4 percent, or 30 cents, to $2.85.

KLA-Tencor Corp. (KLAC), a leading maker of semiconductor production gear, reported lower fourth-quarter net income and revenue and projected higher revenue in the current quarter, but its chief financial officer said he was cautious about the timing of a recovery. The company's shares rebounded from an initial decline and rose 31 cents to $52.44.

Internet auctioneer eBay Inc. (EBAY), which fell $3.50 to $112.24, despite posting record profits after Thursday's close and announcing a two-for-one stock split. The company's revised growth projections were not as bullish as many investors had hoped.

All 30 Dow components posted gains. They included Alcoa Inc. (AA), which increased 87 cents to $26.71 despite Thursday's disclosure by the aluminum maker that interruptions at two of its plants would reduce earnings in the second half of the year by $15 million to $25 million.

Pfizer Inc. (PFE) rose 49 cents to $33.04 even though the drug company reported a loss of $3.59 billion due to nearly $6 billion in expenses related to the recent acquisition of Pharmacia Corp.

Gateway Inc. (GTW) added 46 cents to $4.14. The computer and electronics maker's quarterly report and projections, released after Thursday's close, both exceeded Wall Street projections.

The Russell 2000 index, which tracks smaller company stocks, rose 3.62, or 0.8 percent, to 468.88.

Overseas, Japan's Nikkei stock average fell 0.2 percent. In Europe, Britain's FTSE 100 lost 0.4 percent, France's CAC-40 dropped 1.5 percent, and Germany's DAX index fell 0.5 percent.

Reuters and The Associated Press contributed to this report.