NEW YORK (AP) -- Stocks rose Friday to wrap up their strongest week in almost three months. Banks gained ground after Federal Reserve Chair Janet Yellen said the central bank intends to keep raising interest rates provided the economy continues to improve.
Stocks turned higher over the last few hours of trading to finish at their highest levels of the day. Banks made the largest gains, as they stand to make bigger profits on lending if interest rates rise further. Phone companies traded higher after Verizon reportedly agreed in principle to a new contract with striking employees. Alphabet led technology stocks higher.
Yellen said it will be "appropriate" to raise interest rates in the next few months if the economy continues to improve, and emphasized that the Fed will move slowly and carefully. There were signs of that improvement throughout the week, including increased home sales, leading to big gains for stocks. On Friday the Commerce Department said the U.S. economy grew a bit more in the first quarter than it previously estimated. In recent months stocks have slumped when investors thought the Fed might be about to raise interest rates. That may have changed this week.
"Both inflation and growth are on an upward trend," said Jon Adams, senior investment strategist for BMO Global Asset Management. He said investors may be worrying a bit less about the Fed's plans because the economy could be getting onto more solid footing, but the central bank must remain careful in dealing with investor expectations.
"The Fed's kind of walking a tight rope here," he said.
The Dow Jones industrial average rose 44.93 points, or 0.3 percent, to 17,783.22. The Standard & Poor's 500 index added 8.96 points, or 0.4 percent, to 2,099.06. The Nasdaq composite index picked up 31.74 points, or 0.6 percent, to 4,933.50.
The Commerce Department said the U.S. economy was a bit stronger in the first quarter than it initially believed. The agency said the gross domestic product grew 0.8 percent in the first three months of the year, above its original estimate of 0.5 percent. That's still sluggish, but experts think the economy will grow about 2 percent in the current quarter.
Bank stocks were led higher by Bank of America, which rose 18 cents, or 1.2 percent, to $14.88, and Citigroup, which picked up 47 cents, or 1 percent, to $46.58. Bank stocks have struggled this year because the Fed has pushed back plans to raise rates. Bond prices dipped and yields rose, another sign investors expect interest rates to increase. The yield on the 10-year U.S. Treasury note rose to 1.85 percent from 1.83 percent. The yield on the Treasury note is closely tied to interest rates.
Labor Secretary Thomas Perez said Verizon and its unions agreed in principle to a new four-year contract. About 39,000 landline and cable employees in the Eastern U.S. went on strike in April. They had been working without a contract since August. Verizon gained 46 cents to $50.62.
Google's parent company Alphabet rose after a federal jury said the company did not need permission to use tools made by Oracle when it built its Android software. Oracle said Google stole its intellectual property and sought $9 billion in damages, and it plans to appeal the ruling. Alphabet stock added $10.67, or 1.4 percent, to $747.60.
Benchmark U.S. crude oil lost 15 cents to $49.33 a barrel in New York. Brent crude, which is used to price international oils, gave up 27 cents to $49.32 a barrel in London.
Machinery maker Terex dropped after Chinese heavy equipment maker Zoomlion abandoned its effort to buy the company. Zoomlion offered to buy Terex at the start of the year, after Terex accepted an offer from Finland's Konecranes. Terex backed out of that deal and will instead sell its crane business to Konecranes. Terex stock sank $3.44, or 14.1 percent, to $20.89.
Scientific equipment maker Thermo Fisher said it will buy electron microscope maker FEI for $107.50 per share in cash, or about $4.2 billion. The deal comes about two months after Thermo Fisher paid $1.3 billion to buy Affymetrix, a company that makes equipment to analyze genetic codes. FEI stock climbed $13.55, or 14.3 percent, to $108.13 and Thermo Fisher added 93 cents to $152.13.
The price of gold fell $6.60 to $1,213.80. Gold has slipped about 5 percent over the last two weeks. Silver fell 7 cents to $16.27 an ounce. Copper rose 1 cent to $2.11 a pound.
Wholesale gasoline rose 1 cent to $1.63 a gallon. Heating oil fell 1 cent to $1.49 a gallon. Natural gas rose 2 cents to $2.17 per 1,000 cubic feet.
Germany's DAX and the FTSE 100 in Britain both rose 0.1 percent, and France's CAC 40 gained a bit less than that. Japan's benchmark Nikkei 225 index added 0.4 percent and South Korea's Kospi gained 0.6 percent. Hong Kong's Hang Seng climbed 0.9 percent.
The dollar rose to 110.38 yen from 109.72 yen. The euro dipped to $1.1114 from $1.1191.
AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP . His work can be found at http://bigstory.ap.org/journalist/marley-jay