NEW YORK (Reuters) - U.S. equities ended on Friday on a high note, with the benchmark S&P 500 index registering its best week of the year as investors returned to stocks on expectations Spain was closer to getting aid for its troubled banks.
Oil prices fell as diminished hopes for more stimulus from central banks fuelled concerns about demand.
The euro slid against the dollar, weighed by a three-notch downgrade to Spain's credit rating and signs of economic weakness in Italy and Germany, though it posted its first weekly gain in six weeks.
Senior EU and German officials told Reuters that deputy finance ministers of the 17-nation single currency area would hold a conference call on Saturday morning to discuss Spain's request for an aid package for its ailing banks, although no figure had been set.
On Wall Street, the S&P 500 ended its best week in 2012. The strong gains came after the benchmark index fell more than 6 percent in May and dropped just below its 200-day moving average, signalling a technical bounce for equities.
"What's driving the market here," said Robbert Van Batenburg, head of equity research at Louis Capital in New York, "is the belief we're in the final innings of approaching some form of a solution to contain the Spanish problem. I don't buy it, but maybe there's this understanding out there."
The Dow Jones industrial average ended up 93.24 points, or 0.75 percent, at 12,554.20. The Standard & Poor's 500 Index was up 10.67 points, or 0.81 percent, at 1,325.66. The Nasdaq Composite Index was up 27.40 points, or 0.97 percent, at 2,858.42.
Stocks elsewhere, however, edged lower. The MSCI's world equity index was down 0.25 percent at 300.42. The index is still up 3 percent on the week, its best week since January.
Top European shares closed 0.2 percent lower. The MSCI Emerging Equity Index fell 0.9 percent.
Losses in world shares followed a three-day rally built on expectations of global coordinated efforts to bolster slackening economic growth. But investors were disappointed after neither the European Central Bank nor the U.S. Federal Reserve signalled near-term action.
U.S. President Barack Obama said on Friday that European leaders face an "urgent need to act" to resolve the region's financial crisis as the threat of a renewed recession there spells dangers for an anaemic U.S. recovery five months before elections.
The euro fell 0.5 percent to $1.2501 (0.808 pence), retreating from a two-week high of $1.2625 hit on Thursday. The dollar slid 0.3 percent to 79.40 yen.
Rating agency Fitch slashed Spain's credit rating on Thursday, leaving it just two notches above junk status. It signalled further downgrades could come as the country tries to restructure its troubled banking system.
Adding to the bearish sentiment was data showing Italian industrial production fell far more than expected in April and German imports tumbled at their fastest rate in two years. The U.S. trade deficit also narrowed as both exports and imports dropped due to the economic weakness.
Speculators boosted bets against the euro to a record high in the latest week, according to data from the Commodity Futures Trading Commission released on Friday.
"We are now less confident that the euro zone will continue to muddle through," said global macro hedge fund GLC Ltd in London. "The countries that need to make the biggest adjustment have the weakest economies. In addition, austerity fatigue is spreading."
Brent crude for July was down 46 cents to settle at 99.47 a barrel, after hitting a low of $97.19.
U.S. crude prices fell 72 cents to settle at $84.10 a barrel, having touched a low of $82.00. Both contracts are down for a second day.
Copper fell to its lowest since December as investors feared China's surprise interest-rate cut was a sign of a sharp slowdown in the world's biggest metals consumer.
The metal, seen as a barometer of global economic health, extended its losing streak to a sixth week, its longest such run in two years.
Spot gold rose to $1,594 an ounce from $1,589.15 late in New York on Thursday, reversing heavy losses as uncertainty over Spanish banks encouraged safe-haven buying.
The benchmark 10-year U.S. Treasury note was up 3/32, the yield at 1.6336 percent.