Stocks closed higher in thin trading Friday, with all three major indexes log their best weekly gains this year, amid optimism that euro zone leaders would move closer to tackle the region's ongoing debt crisis, including a recapitalization of Spanish banks over the weekend.

“Bipolar markets here," said Alan Valdes, director of floor operations at DME Securities. "Yesterday, the market did not like what it heard from Bernanke. And today, we’re getting rumors out of Europe that Spain may get a bailout, which is lifting the market and the President spoke today begging for some action out of Congress."

“And don’t forget—next week is Quadruple Witching!” he added.

The Dow Jones Industrial Average rallied for a fourth-straight day led by Wal-Mart , which hit a 12-year high earlier in the session.

The S&P 500 and the Nasdaq also ended higher. The CBOE Volatility Index, widely considered the best gauge of fear in the market, dropped near 21.

For the week, the Dow surged 3.59 percent, the S&P 500 jumped 3.72 percent, and the Nasdaq soared 4.04 percent. All 30 Dow components logged gains for the week, led by Home Depot and BofA .

All 10 S&P sectors also finished in the black this week, led by financials and materials.