A Wall Street sign is pictured outside the New York Stock Exchange amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., April 16, 2021.
A Wall Street sign is pictured outside the New York Stock Exchange amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., April 16, 2021. Reuters / Carlo Allegri

U.S. stocks climbed on Friday as upbeat retail sales data allayed some concerns about an imminent recession, while investors scaled back bets of a supersized interest rate hike in July after comments from Federal Reserve policymakers.

The benchmark S&P 500 and the blue-chip Dow indexes rose after a five-day run of losses, which were mostly sparked by worries of a 100-basis-point interest rate hike at the coming policy meeting following hot inflation data.

Moving interest rates too dramatically could undermine the positive trends still seen in the economy and add to the already large amount of uncertainty, Atlanta Fed President Raphael Bostic said. Two of the Fed's most hawkish policymakers said on Thursday they favored another 75-basis-point rate increase this month.

Banks earnings also hit full stride, with Citigroup, jumping 11.1% after posting a smaller-than-expected 27% drop in quarterly profit on usual strength in its treasury services business and as its trading desks cashed in on market volatility.

Wells Fargo gained 5.9% even as it set aside more money to cover potential loan losses.

The wider S&P banking index jumped 5.0% after sinking to December 2020 lows in the previous session when Morgan Stanley and JPMorgan Chase & Co posted downbeat results and warned of economic headwinds.

"We are likely to see less Citigroup, more Wells Fargo type of earnings, where companies are potentially warning and guiding down, but the reaction could be that expectations were already so low, so you could see a buy-the-dip mentality," said Dennis Dick, proprietary trader at Bright Trading LLC.

Next week, a slew of major companies including Goldman Sachs, Johnson & Johnson, Netflix and Tesla are scheduled to report earnings.

Analysts expect aggregate S&P 500 second-quarter profit growth of 5.6% on a year-on-year basis, less than the 6.8% forecast at the beginning of the quarter, according to Refinitiv.

Despite Friday's bounce, all three indexes were set to book weekly losses.

"The market is due for a short-term snapback and because we got better-than-expected results from Citigroup and retail sales, that gave fundamental reasons for investors to be optimistic," said Sam Stovall, chief investment strategist at CFRA.

Data showed U.S. retail sales rebounded strongly in June as Americans spent more on gasoline and other goods amid soaring inflation.

Meanwhile, a University of Michigan survey showed U.S. consumers tempered their inflation expectations in July alongside a sharp drop in gasoline prices over the past month.

Traders scaled back bets of a full percentage point rise rate hike later this month, with fed fund futures now pricing in about a 30% chance compared with 80% earlier this week, according to the CME Group's Fedwatch tool.

At 12:29 p.m. ET, the Dow Jones Industrial Average was up 550.66 points, or 1.80%, at 31,180.83, the S&P 500 was up 59.21 points, or 1.56%, at 3,849.59, and the Nasdaq Composite was up 149.06 points, or 1.32%, at 11,400.24.

BlackRock firmed 1.6% despite posting a bigger-than-expected drop in quarterly profit.

UnitedHealth Group Inc rose 5.1% after lifting its full-year profit forecast for a second straight quarter.

Shares of Pinterest rallied 15.2% following a report that activist investor Elliott Management has taken a stake of more than 9% in the social media company.

Advancing issues outnumbered decliners by a 4.65-to-1 ratio on the NYSE and a 2.36-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 31 new lows, while the Nasdaq recorded 27 new highs and 97 new lows.