US Stocks: Best week in two years (ext)

NEW YORK (CNNMoney) -- The fireworks came early on Wall Street. Stocks started the second half of the year firing on all cylinders Friday, posting the strongest week in two years, as fresh data boosted investor optimism about the state of the economy.

After starting the day barely changed, the Dow Jones industrial average (INDU) rallied 168 points, or 1.4%. The S&P 500 (SPX) added 19 points, or 1.4%, and the Nasdaq composite (COMP) gained 43 points, or 1.5%.

Stocks initially got a lift Friday after a stronger-than-expected report on the nation's manufacturing sector. The Institute of Supply Management's manufacturing index jumped to 55.3 in June -- well above the 51.1 that economists had expected.

"Investors thought the economy would continue to be fairly weak through the summer, but the Chicago PMI number yesterday and the national manufacturing data this morning caused a huge swing in investor sentiment," said Michael Sheldon, chief market strategist at RDM Financial Group.

A strong manufacturing sector will help drive economic growth and corporate profits, he added.

The dollar fell against the euro and the British pound, but gained ground versus the Japanese yen.

Oil for August delivery slipped 48 cents to settle at $94.94 a barrel.

Gold futures for August delivery fell $20.20 to settle at $1,482.60 an ounce.