Stocks Rise, Buoyed by Hopes for Stimulus

Gibley said if Spain's banks were to begin receiving bailout loans from the new bailout facility, the European Stability Mechanism, existing bondholders could become subordinated, making it even more difficult for Spain to raise money in bond auctions at a time when foreign investors are already shunning the market.

Sam Stovall, chief equity strategist at S&P Capital IQ, said the Fed would likely have to see an impact on the U.S. economy before making any moves. He doesn't think there's been enough bad U.S. economic data to convince the Fed just yet to take any major action. The next Federal Open Market Committee meeting takes place next week.

Stovall said that until central banks globally make a statement -- for instance if the European Central Bank actually came out and said, "We are going to be guaranteeing euro deposits" -- investors should be wary about their assumptions.

He called the market pop on Friday a "counter-trend rally" that could work its way up to the 1,350 area on the S&P 500 before the market then digests gains and makes revaluations. "There's fear of buying at this counter-trend top, but then fear of missing out on a further move."

The FTSE in London settled up 0.2% and the DAX in Germany closed higher by 1.5%. The Hong Kong Hang Seng closed ahead by 2.3% and the Japan Nikkei Average finished flat.

July crude oil futures were up 6 cents at $83.97 a barrel. August gold futures settled up $8.50 to $1,628.10 an ounce.

The Federal Reserve Bank of New York reported Friday that its Empire State Manufacturing Index showed a much steeper-than-expected decline to 2.29 in June, the lowest level going back to last November, from 17.1 in May. Economists surveyed by Briefing.com expected a fall to 10.

Painting the same picture on the overseas drag was the Federal Reserve's May industrial production report, which said that industrial production fell 0.1% in May after a revised 1% gain in April. This was in contrast to the rise of 0.1% that economists, on average, were expecting. Capacity utilization dropped to 79% in May from 79.2% in April.