U.S. stocks rose on Friday of optimistic profit forecasts from software giant Microsoft and mortgage lender Countrywide Financial.

The Dow Jones Industrial Average rose 134.78, or 1 percent, to end at 13,806.7. The Nasdaq Composite Index gained 53.33, or 1.9 percent, to 2,804.19. The S&P 500 climbed 20.88, or 1.4 percent, at 1,535.28.

Microsoft (Nasdaq:MSFT) shares jumped $3.04, or 9.50 percent, to $35.03 after its quarterly revenue topped estimates by more than $1 billion. Microsoft earnings were 45 cents per share, beating a 39 cent per share consensus by Wall Street analysts polled by Thomson Financial. Revenue rose 27 percent to $13.8 billion. In addition, the software maker said full-year earnings could reach $1.81, beating expectations of $1.73.

Meanwhile, Countrywide shares rose $4.23, or 32 percent to close at $17.30 predicted it would regain profitability in the coming quarter and in 2008 after posting its first quarterly loss in 25 years. The lender has been hit hard by a downturn in the subprime market. The company recently announced a plan to reduce losses by modifying over $16 billion worth of loans.

In other financial news, the world's largest brokerage, Merrill Lynch saw its stock price soar on speculation that its Chairman and Chief Executive Stan O'Neal would be forced out and that the company could be bought. Shares rose $5.19, or 8.52 percent, to close at $66.09.

Investors also rode sent shares higher on rumors which began Wednesday indicating that Federal Reserve could schedule an emergency meeting or raise interest rates ahead of a planned meeting next week.

In other major markets, rate cut talk sent the dollar to another record low, falling to a record low versus the euro of $1.4394. The dollar has been dropping steadily, consistently hitting new lows on fears of inflation after the Federal Reserve lowered interest rates on September 18 to ward off a possible recession.

Also, political instability in the Middle East has sent oil prices soaring. Crude oil surged past $92 dollars after Turkey launched strikes in northern Iraq to crush Kurdish rebels who killed Turkish soldiers.