U.S. stocks rose Friday on optimism that officials in Cyprus will reach a deal this weekend to rescue the nation's troubled banks.
The Dow Jones industrial average gained 90 points, or 0.6%. The S&P 500 and the Nasdaq both gained 0.7%. The Dow is back above 14,500 and the S&P 500 is once again less than 1% away from the record high it set in October 2007.
Despite Friday's advance, the major gauges all ended the week down a little less than 0.5%. All three indexes are up between 7% and 11% so far in 2013.
Officials in Cyprus could make decisions on "the hard dilemmas" facing the country later Friday, according to a government spokesman.
"This is being interpreted as a step towards a solution," said Frank Davis, director of sales and trading at LEK Securities. "We don't know what that solution will be, but there seems to be something in the works."
Cyprus is facing a Monday deadline to come up with €5.8 billion in order to secure a €10 billion bailout from the European Union and International Monetary Fund.
Talks between Russian officials and the Cypriot government broke up early Friday, with no agreement on a cash infusion that could help the island nation skirt a default. Nearly a third of the money in Cyprus' outsized banking sector is from Russian depositors.
While a default is potentially disastrous for Cyprus, it wouldn't necessarily destabilize the European economy on its own. But investors are watching to see how the situation is resolved and if it could set a precedent for larger economies that may face similarly dire straits in the future.
"One must be impressed with how well the markets have absorbed the still unresolved Cyprus situation," wrote Brown Brothers Harriman strategist Marc Chandler in a client note.
Shares of BlackBerry(BBRY) fell nearly 8%, revering gains from earlier in the week. The company's new Z10 smartphone, which has received mixed reviews, went on sale at AT&T(T) stores in the United States Friday.
The Ifo Business Climate Index for German manufacturing and trade slipped in March, as companies lost enthusiasm about their business outlook. But the index also showed that Europe's strongest economy continues to prevail, buoyed by domestic spending. Construction is at its strongest point since reunification of East and West Germany, more than 20 years ago.