Updated from 4:43 p.m. EDT

Stocks in New York closed 1% to 2% higher, although off their best levels of the session Friday, after the U.S. government released the parameters for the so-called stress tests being conducted on the nation's large banks.

The Dow Jones Industrial Average rose 119.23 points, or 1.5%, to 8076.29, while the S&P 500 climbed 14.31 points, or 1.7%, to 866.23. The Nasdaq gained 42.08 points, or 2.6%, to 1694.29.

For the week, the Dow lost 0.7%, and the S&P 500 fell 0.4%. That meant an end to six-week winning streaks for both. The Nasdaq, however, advanced 1.3%.

In a 21-page report, the Federal Reserve shared the process used for the Supervisory Capital Assessment Program, or stress test.

Meant to determine the capital adequacy of the 19 biggest financial institutions, the report reiterated earlier comments from Treasury Secretary Tim Geithner that most U.S. banks already have capital levels "well in excess of the amounts required to be well capitalized."

However, some banks may need to raise new funds as reserves have been hit by the economic and market downturn. Specifics weren't disclosed this time, though more details from the tests are expected in early May.

For his part, Geithner has taken a more positive tone recently as the rate of deterioration of some aspects of the economy has slowed.

"In recent weeks, there have been some encouraging signs that the global economic downturn may be slackening," he wrote in a column in the Financial Times ahead of a meeting with officials from other nations. "Conditions in some financial markets have improved and the decline in world trade may be abating. However, real progress requires time, and significant risks and challenges remain."

Financials were volatile, but generally rose. At the end of the day, Bank of America ( BAC) gained 3.2%, JPMorgan Chase ( JPM) added 0.5%, and Citigroup ( C) lost about 0.3% on the Dow .

Microsoft ( MSFT), American Express ( AXP) and Amazon.com ( AMZN) were among the winners after reporting quarterly results following the previous session. Those stocks rose 10.5%, 20.7% and 4.8%, respectively.

"From a technical perspective, you don't have markets that become overbought and stay overbought for extended periods of time during bear markets," says Marc Pado, U.S. market strategist Cantor Fitzgerald. "It's a characteristic of a bull market. If you're a bear, you can find reasons to be negative about things, looking at those overbought indicators, but if you believe we've seen the bottom, a situation like this could persist for an extended period."

Ford ( F) shares surged 11.4% to $5 on the strength of a narrower-than-expected loss and a promising outlook.

Xerox ( XRX) rose 3.7% to $5.95 after the company turned a first-quarter profit . However, it did rein in its guidance.

More economic clues, in the form of durable goods orders and new home sales, were also on Friday's agenda. The Commerce Department said durable goods orders, which are considered a leading indicator of manufacturing activity, declined 0.8% in March, or 0.6% ex-autos, after breaking a string of declines in February. Expectations, however, were for declines nearly double that.

A separate report showed that new homes sold at a 356,000 pace in March, ahead of the consensus estimate for a rate of closer to 340,000, but down from an upwardly revised number in February.

Longer-dated Treasuries were recently falling. The 10-year was losing 18/32 to yield 3%, and the 30-year was down 1-12/32, yielding 3.9%. The dollar was mixed.

As for commodities, oil rose $1.93 to settle at $51.55 a barrel, while gold was up $7.50 to $914.10 an ounce after reports that China has been increasing its gold reserves in recent years.