Strong car sales, revived merger and acquisition activity, and an expected product launch from Apple have helped propel stocks higher in a week that also featured some major headwinds.
Despite uncertainty over Syria and a disappointing jobs report at the week's close, all three leading indices posted gains for the holiday-shortened week.
The Dow Jones Industrial Average rose 112.19 points (0.76 per cent) to 14,922.50. The broad-based S&P 500 advanced 22.20 (1.36 per cent) to 1655.17, while the tech-rich Nasdaq Composite Index tacked on 70.14 (1.95 per cent) at 3660.01.
The week's gains were a big improvement over August, which saw the steepest monthly declines for the Dow and S&P 500 since May 2012.
Perhaps the week's biggest bright spot was US August vehicle sales, with the industry selling 17 per cent more cars than a year ago. General Motors, Ford and Chrysler all posted double-digit gains.
The robust car sales lifted stocks on Wednesday and "spilled over into better sentiment in general", said Michael James, managing director of equity trading at Wedbush Securities.
Analysts were also cheered by an invitation from Apple announcing a September 10 event in California. The gathering is widely expected to launch two new versions of the iPhone, including a less expensive model expected to appeal to China and other emerging markets.
On Friday, The Wall Street Journal reported that Apple was preparing to ship iPhones to China Mobile in a long-anticipated deal. Apple closed the week 2.3 per cent higher at US$498.22.
The news on vehicles, telecommunications and Apple helped offset Friday's disappointing jobs report. The Labour Department reported a gain of 169,000 jobs in August, below the 177,000 projected by analysts. The report also slashed the jobs estimates for June and July.
The report, while "not a disaster", was weak enough to suggest that the Federal Reserve will either delay its plans to taper its bond-buying programme, or reduce it even more gradually than previously thought, said William Lynch, director of investment at Hinsdale Associates.
"I don't think the economy, as sluggish as it is, can take too much in the way of tapering," Lynch said.
Investors are also skittish over the Obama Administration's efforts to launch a military strike on Syria in response to Syria's purported use of chemical weapons.
Crude oil prices on Friday pushed to a 28-month high of US$110.53 in New York amid US-Russian tensions over Syria. But equity markets have reacted inconsistently to Syria news, sometimes dropping in recent weeks on Syria headlines; sometimes not.
"Of all the risks out there, the one that has the highest probability to hurt the market in the near term is the Middle East situation," said Scott Wren, senior equity strategist at Wells Fargo Advisors. "The market's not as focused on it as I think it probably ought to be."
Congressional debate on Syria is expected to dominate this week's news. The economic calendar is relatively light, with August retail sales and inflation data due on Friday.
The calendar also includes a September 12 meeting with Securities and Exchange Commission chairwoman Mary Jo White and leading exchanges in the wake of the August 22 outage at Nasdaq Stock Market caused by a tech glitch.