Stocks extended gains on Friday on better-than-expected results from companies, including American Express and Ford, and reassuring economic data boosted hopes the recession is showing signs of abating.

The Nasdaq outpaced the other indexes, gaining more than 2 percent as it was lifted by Microsoft . The software giant reported its profit fell, but investors cheered efforts to cut costs and that the release of its Windows 7 operating system was on track. Microsoft was up 8.2 percent.

The Dow Jones industrial average <.DJI> rose 123.85 points, or 1.56 percent, to 8,080.91. The Standard & Poor's 500 Index <.SPX> gained 13.62 points, or 1.60 percent, to 865.54. The Nasdaq Composite Index <.IXIC> put on 36.20 points, or 2.19 percent, to 1,688.41.

(Reporting by Leah Schnurr; Editing by Jan Paschal)