Investors welcomed the advance as a respite from the grim trade thus far in 2016 that resulted in a particularly bruising session on Thursday prompted by rising worries about the global economy.
Analysts weren`t sure what to make of Friday`s gains.
"It is a counter-trend rally, a bear market rally, if you believe we`re at the beginning of a bear market," said Sam Stovall, chief investment officer at S&P Capital IQ.
"It`s a little too early to say that everything is behind us and now we`re back to the races."
"It`s hard to read too much into it," said Mace Blicksilver, director of Marblehead Asset Management, who said he was troubled that big US growth stocks like Facebook and Google parent Apple did not post large gains.
Key factors behind Friday`s rise included data that showed the German economy grew by a solid 0.3 percent in the fourth quarter, and a 0.2 percent rise in US retail sales in January.
Investors were also cheered by a 12.3 percent rise in US oil prices to $29.44 a barrel on speculation that the Organization of the Petroleum Exporting Countries could organize talks with other producers to cut output.
Banking stocks were especially sky-bound with Deutsche Bank soaring 11.8 percent after announcing it would repurchase up to 4.8 billion euros ($5.4 billion) of its own bonds, a show of financial force meant to assuage concerns over its strength.
That was accompanied by news that JPMorgan Chase chief executive Jamie Dimon spent $26 million of his own money to purchase JPMorgan shares, which helped lift JPMorgan shares 8.3 percent.
Other banks also powered up, with Barclays jumping 6.3 percent, BNP Paribas 5.9 percent and Bank of America 7.1 percent.
More losses in Japan
For all the strength in Europe and the US, Asian stocks endured another bruising session, with Japan`s Nikkei index tumbling another 4.8 percent, taking its total loss this week to more than 11 percent.
The latest retreat came after the yen, viewed as a safe-haven investment, hit 16-month-plus highs against the dollar. The yen retreated later Friday.
The currency`s rise led Tokyo to say it would take "appropriate" measures, fuelling speculation officials were considering a currency market intervention.
Friday`s gains also did little to make up for losses so far in 2016. Milan has lost nearly 23 percent of its value, Frankfurt over 16 percent, Paris nearly 14 percent and London over 8 percent.
Investors remain perturbed by a range of concerns, including slowing growth in China, the Federal Reserve`s plan to lift interest rates, the commodity bust and the stability of the banking sector in a world of low or negative interest rates.
"The fear of a global recession is very real," said Craig Erlam, senior market analyst at Oanda trading group.
"It does feel like a culmination of factors that have built up over the last seven years are finally coming together to test just how far the global economy has come and how strong the recovery truly is," he told AFP.
- Key figures around 2200 GMT -
New York - Dow: UP 2.0 percent at 15,973.84 (close)
New York - S&P 500: UP 2.0 percent at 1,864.78 (close)
New York - Nasdaq: UP 1.7 percent at 4,337.51 (close)
London - FTSE 100: UP 3.1 percent at 5,707.60 points (close)
Frankfurt - DAX 30: UP 2.5 percent at 8,967.51 (close)
Paris - CAC 40: UP 2.5 percent at 3,995.06 (close)
Milan - FTSE MIB: UP 4.7 percent at 16,514 (close)
EURO STOXX 50: UP 2.8 percent at 2,756.16 (close)
Tokyo - Nikkei 225: DOWN 4.8 percent at 14,952.61 (close)
Euro/dollar: DOWN at $1.1250 from $1.1323 on Thursday
Dollar/yen: UP at 113.25 yen from 112.39 yen
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