The sign for a Gap store is seen on 5th avenue in midtown Manhattan in New York June 16, 2015.
The sign for a Gap store is seen on 5th avenue in midtown Manhattan in New York June 16, 2015. Reuters / Brendan McDermid

The S&P 500 index on Friday was set for its best weekly gain since mid-March as upbeat earnings, strength in consumer spending and signs of inflation peaking eased worries about a sharp slowdown in economic growth.

The benchmark index and the tech-heavy Nasdaq appeared set to snap their longest weekly losing streak since the dotcom bust in 2001, up 5.8% and 6% respectively for the week.

The blue-chip Dow was on course for its best week since November 2020, up 5.6%.

The Commerce Department's report showed consumer spending increased by a more-than-expected 0.9% in April and inflation rose at a slower rate, raising hopes that the Federal Reserve might not hike rates as aggressively as previously thought.

March spending growth was also revised to 1.4% from 1.1%. The personal consumption expenditures price index, the Fed's preferred inflation gauge, gained 0.2% last month after rising 0.9% in March.

A mixed set of economic data, some optimistic retail earnings forecasts, and less hawkish minutes from the Fed's May meeting brought back investors this week.

"There is clearly a bit of wash out, a little exhaustion in the selling we are seeing. If you look at valuations, investor sentiment, and some economic indicators, there are some signs that perhaps a bottom is within reach," said Darren Chervitz, portfolio manager at Jacob Asset Management.

All of the 11 major S&P sectors advanced, with technology up 2.7%, followed by a 2.4% rise in the consumer discretionary sector.

Ulta Beauty gained 9.9% to top the S&P 500 index after the retailer forecast strong annual results.

Enterprise software maker Autodesk Inc and PC maker Dell Technologies Inc jumped 9.7% and 12% respectively, after they beat quarterly revenue and profit estimates.

At 12:17 p.m. ET, the Dow Jones Industrial Average was up 361.99 points, or 1.11%, at 32,999.18, the S&P 500 had advanced 71.39 points, or 1.76%, to 4,129.23, and the Nasdaq Composite was up 294.14 points, or 2.51%, at 12,034.79.

Gap Inc and American Eagle Outfitters fell 0.9% and 3.8% respectively, after the clothing retailers trimmed their annual profit forecasts amid decades-high inflation.

The CBOE volatility index fell for a third straight session and was at 25.97 points.

Analysts expect trading volumes to be light ahead of a long weekend, with U.S. stock markets shut on Monday for Memorial Day holiday.

Advancing issues outnumbered decliners by a 5.96-to-1 ratio on the NYSE and by a 3.57-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and 29 new lows, while the Nasdaq posted 31 new highs and 67 new lows.