NEW YORK – Stronger retail sales and surging profits from Google sent stocks higher Friday. The Dow Jones industrial average turned positive for the year and the S&P 500 index had its best week in more than two years.

Retail sales increased 1.1 percent in September, the biggest gain in seven months and double what economists projected. Retail sales are a key barometer of consumer spending, which helps drive economic growth. It was the latest positive report on the U.S. economy and added to a growing body of evidence that another U.S. recession isn’t as likely as many had feared.

“The market’s decline was predicated on the collapse of the euro zone and a U.S. recession,” said Dan Greenhaus, chief global strategist at the broker BTIG in New York. “Neither seems likely now.”

The Dow rose 166.36 points, or 1.4 percent, to close at 11,644.49. The average of 30 large companies has shot up 9.3 percent after hitting 10,655 on Oct. 3, its lowest level of the year.

The Standard & Poor’s 500 rose 20.92, or 1.7 percent, to 1,224.58. The index gained 6 percent this week, the best week since July 2009. It was the highest close for the S&P since Aug. 3, when Washington was in paralysis over raising the country’s borrowing limit.

The dollar and U.S. Treasury prices fell as investors moved money into assets that perform better when the economy picks up. The yield on the 10-year Treasury note rose to 2.25 percent, the highest level since August.

Oil and other commodities rose sharply. Energy industry stocks jumped. Exxon Mobil Corp. jumped 2.3 percent to $78.11; Chevron Corp. rose 2.7 percent to $100.47.

Stock indexes have reversed a long slide in recent weeks, helped by better news on the U.S. economy and progress in Europe toward resolving that region’s debt crisis. Hiring has picked up, although modestly, and manufacturing continued to grow. The Dow soared 330 points Monday after the leaders of France and Germany pledged to come up with a far-reaching solution to the region’s debt crisis by the end of October.

Google Inc. shot up 5.8 percent to $591.68 after its quarterly income jumped 26 percent. Apple Inc. rose 3.3 percent to $422 as its new iPhone went on sale. Record-setting iPhone sales have helped Apple thrive this year even as the economy slowed.

The two tech leaders helped the Nasdaq gain 7.6 percent this week. That’s the best week since July 2009. The Nasdaq rose 47.61 points Friday, or 1.8 percent, to 2,667.85.

Navistar International Corp. jumped 7.3 percent to $41.51 on news that the billionaire investor Carl Icahn bought a stake in the maker of military trucks and recreational vehicles.

Retail sales are the government’s first look at consumer spending each month. Household spending on everything from clothes to health care accounts for 70 percent of the U.S. economy. If that spending falls sharply, a recession is more likely.

European markets extended an eight-day rally despite an overnight downgrade of Spain by Standard & Poor’s and warnings from Fitch about big banks. Food and soap company Unilever PLC announced a major acquisition, and Swiss agrochemicals firm Syngenta reported strong third-quarter sales.

Google reported late Thursday that its third-quarter revenue was one-third higher than last year. It was Google’s fourth consecutive quarter of year-over-year revenue growth. Google is doing well because of the reach of its search engine and the effectiveness of its ads.

The government also said Thursday that businesses added to their stockpiles for the 20th consecutive month while sales rose for a third straight month. The increase suggests businesses remained confident enough to keep stocking their shelves.

Five stocks rose for every one that fell on the New York Stock Exchange. Trading volume was below average, 3.7 billion shares.

Stock futures are rising, helped by encouraging corporate news in the U.S. and Europe.

Google Inc. rose more than 7 percent in premarket trading after the tech giant reported its third-quarter profit climbed 26 percent. Food and soap company Unilever PLC announced a major acquisition, and Swiss agrochemicals firm Syngenta reported strong third-quarter sales.

European markets rose.

Toymaker Mattel Inc. reported a 6 percent rise in its third quarter earnings.

The government reports before the market opens on retail sales in September, a key early barometer of consumer activity.

S&P 500 futures are up 8 points, or 0.7 percent, at 1,206 at 7:51 a.m. Eastern time. Dow Jones industrial average futures are up 74, or 0.7 percent, at 11,466. Nasdaq 100 futures are up 14, or 0.6 percent, at 2,340.

TORONTO (Reuters) – Toronto’s main stock index rallied to its highest close in more than a week on Monday, driven by bargain-hunting, optimism over the euro zone debt crisis and acquisition activity on both sides of the border.

BlackBerry maker Research In Motion surged nearly 10 percent to C$26.59, moving into the spotlight as a potential takeover target after news that Google is set to buy Motorola Mobility for about $12.5 billion in cash.

“We saw a fairly aggressive acquisition by Google in the handset sector so that’s definitely giving RIM a bit of a boost … potentially it puts them on the radar for a potential acquisition,” said Youssef Zohny, portfolio manager at Van Arbor Asset Management in Vancouver.

“It’s putting pressure on Microsoft and Apple and other tech companies to look at a lot of assets in that sector, and definitely RIM has been beaten up over the last few months and there’s definitely some value there.”

Energy shares climbed 1.5 percent as oil prices jumped nearly $2 a barrel on a broad rebound in risk appetite, partly driven by expectations that European leaders will come up with solutions to the region’s debt crisis.

Among them, Suncor Energy rose 1.7 percent to C$32.43, and Canadian Natural Resources added 1.5 percent to C$36.88.

“I think things have just settled down, they’ve had such a precipitous drop,” said Greg Eckel, portfolio manager at Morgan Meighen & Associates.

“I think what’s happening now in that the catastrophic news flow has for now somewhat diminished, so I think you’re starting to see a little more comfort, what hopefully is some bottom fishing and can carry the market up a few points.”

The Toronto Stock Exchange’s S&P/TSX composite index closed up 141.41 points, or 1.13 percent, at 12,683.61, its highest finish since August 3. All of the index’s 10 sectors were stronger, including financials, up 1.4 percent, as recently battered Manulife Financial jumped 4.2 percent to C$13.73.

Toronto-Dominion Bank was also a top gainer, up 1.3 percent at C$76.88 after announcing a deal to buy MBNA Canada’s credit card business.

Helping to boost confidence and commodity prices, data showed the Japanese economy shrank much less than expected in the second quarter as companies made strides in restoring output after the earthquake in March.

U.S. data, however, was still disappointing for the market with a report showing manufacturing in the New York area contracting for a third straight month in August.

($1=$0.99 Canadian)

(Reporting by Claire Sibonney; editing by Peter Galloway)

NEW YORK (Reuters) – Wall Street stocks rose for a third day on Monday as investors saw Google’s offer for phone maker Motorola Mobility as an excuse to jump back into the market after weeks of sharp selling.

Acquisition activity is often viewed as a sign major corporations sitting on big cash piles are willing to pay for shares even as economic growth remains sluggish.

Motorola Mobility Holdings Inc jumped 55.8 percent to $38.13 after Google offered $12.5 billion to buy the company, which would be Google’s biggest deal ever. Google shares ended down 1.2 percent at $557.23.

With Monday’s gains, the stomach-churning losses incurred last week have now been wiped out. Among big winners were banks, which have been a frequent target for selling. Bank of America Corp rose 7.9 percent to $7.76, making it the Dow’s biggest percentage gainer.

“The shining point throughout this whole debacle is that corporate America is actually doing quite well,” said King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco. “It shows that they’re not yet ready to throw in the towel.”

Shares of other cell phone companies also rose, riding hopes of additional takeovers or the possibility of business shifting to Google’s competitors. Blackberry maker Research in Motion advanced 10.4 percent to $27.11 while Nokia jumped 17.4 percent to $6.29.

The S&P financial index rose 3.2 percent. Shares of Bank of America advanced after it said it plans to sell its credit card business in Canada to TD Bank Group.

Three days of market gains follow weeks of intense volatility and a sharp selloff that put the S&P 500 in negative territory for the year. After the rebound, the S&P is now down just 4.2 percent on the year.

“It’s causing people to rethink their view toward the market,” said Nick Kalivas, senior equity index analyst at MF Global in Chicago. “It’s causing people to think more about valuation than they have in recent days.”

The Dow Jones industrial average shot up 213.88 points, or 1.90 percent, to 11,482.90. The Standard & Poor’s 500 Index gained 25.68 points, or 2.18 percent, to 1,204.49. The Nasdaq Composite Index climbed 47.22 points, or 1.88 percent, to 2,555.20.

Trading volume slowed from last week to 8.14 billion on Monday, down from the daily average of approximately 16 billion shares traded last week.

About 10 stocks advanced for every declining stock on the New York Stock Exchange, while roughly four stocks rose for every declining stock on the Nasdaq.

A meeting on Tuesday by French and German political leaders was expected to result in initiatives needed to restore confidence in credit and other markets.

Shares of Lowes Cos Inc were up 0.9 percent at $19.68 after it reported weaker-than-expected quarterly sales and cut its fiscal-year outlook. Wal-Mart Stores Inc and Home Depot Inc report earnings on Tuesday.

In other deal news, world No. 1 oil drilling contractor Transocean is paying double the market price for Aker Drilling to refresh its aging fleet of Norwegian drilling rigs and boost flagging orders. Transocean shares advanced 3 percent to $57.26 in New York.

(Reporting by Ashley Lau; Editing by Kenneth Barry)