Investors awaited August's consumer prices (CPI) report on Tuesday for any signs that inflation may be easing. It is expected to show that prices rose at an 8.1% pace over the year in August, compared with 8.5% in July.

Wells Fargo economists expect headline inflation to log its steepest monthly decline since the peak of the pandemic in April 2020, helped by a pullback in gas prices.

All 11 major S&P sectors traded higher on Friday, with communication services, technology, energy and consumer discretionary leading the way.

Hammered since the beginning of the year over concerns about higher interest rates, high-growth stocks rose in the week.

Investors are jittery about the prospects of another outsized interest rate hike from the Federal Reserve. On Friday, Fed Governor Christopher Waller said the Fed should be aggressive with rate hikes while the economy "can take a punch," while Kansas City Fed President Esther George said taming inflation could be a tough task.

Both remarks come after Fed Chair Jerome Powell said on Thursday that the U.S. central bank is "strongly committed" to controlling inflation.

Traders are pricing in a 90% chance of a 75 basis point rate hike at the next meeting, up from 57% a week earlier, according to CME Group's Fedwatch Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html?redirect=/trading/interest-rates/fed-funds.html.

The CBOE volatility index, a gauge of investor anxiety, closed to a two-week low of 22.79 but stayed above its long-term average of about 20.

The Dow Jones Industrial Average rose 377.19 points, or 1.19%, to 32,151.71, the S&P 500 gained 61.18 points, or 1.53%, to 4,067.36 and the Nasdaq Composite added 250.18 points, or 2.11%, to 12,112.31.

For the week, the Dow advanced 2.7%, the S&P 500 climbed 3.6% and the Nasdaq gained 4.1%.

U.S. equity funds recorded outflows of $11.5 billion in the week to Wednesday, their largest outflow in 11 weeks, Bank of America Merrill said on Friday.