By Dan Strumpf 

Stocks rose sharply Friday, bouncing back from the biggest loss for major benchmarks in two months.

The Dow Jones Industrial Average rose 196 points, or 1.2%, to 17142, extending its gains through the afternoon. The S&P 500 index added 19 points, or 1%, to 1985. The Nasdaq Composite Index climbed 47 points, or 1.1%, to 4514.

The Dow was buoyed by a rally in shares of Nike Inc., which reported a 23% increase in quarterly profits. Shares of the shoemaker surged 12%.

Investors were cautiously stepping in after Thursday's selloff, though volumes were relatively subdued, a sign that some investors were opting for a wait-and-see approach, traders said. On Thursday, the Dow shed 1.5% and the S&P 500 declined 1.6% amid a flurry of concerns over economic growth and geopolitical tensions.

"We certainly have some buyers stepping back into the market in certain areas, but it's not one where we see folks buying things hand over fist, " said Scott Bacigalupo, head of Americas cash equities sales and trading at Bank of America Merrill Lynch. "It's people putting their toe in the water again."

Recent action leaves the major indexes poised for weekly losses. The S&P 500 is off 1.5% this week.

Still, many long-term money managers remain optimistic about the outlook for stocks, arguing that steady economic growth in the U.S. means that the market can handle tighter Fed policy. Investors widely expect the central bank to raise rates sometime next year after winding down its bond-buying program in October.

Investors on Friday got additional evidence that the economic recovery remains intact. Before the open, the Commerce Department reported that the U.S. economy grew at a rate of 4.6% in the second quarter, up from a previous estimate of 4.2%. The result was in line with expectations. The reading on September's consumer sentiment of 84.6, up from August's 82.5, was in line with expectations.

"Ultimately strong economic growth is good for the markets," said Doug Coté, chief market strategist at Voya Investment Management, which manages $214 billion. "I'm a buyer at these levels."

Stocks were mixed overseas. Japan's Nikkei Stock Average fell 0.9% to 16,229.86, dropping back into negative territory for the year. In Europe, the Stoxx Europe 600 index gained 0.3% Friday but declined 1.8% for the week.

The dollar continued to strengthen against major rivals. The euro fell to $1.269 from $1.268 late Thursday.

The yield on the benchmark 10-year Treasury note rose to 2.534%, according to FactSet. Yields move inversely with prices.

Investors on Friday continued to grapple with the reasons behind Thursday's selloff. While many attributed it to actions in Russia that seemed to pave the way for deeper tensions with the West, others cited unease with high stock prices and uncertainty over the Fed's timeline for monetary tightening.

"Can equities rally in light of rates rising? I think that's what some investors are trying to figure out and whether there is an answer to that," Mr. Bacigalupo said.

Others viewed the decline as a return to normal trading patterns after a sleepy summer for stocks. Investors must have to contend with a number of uncertain variables as they enter the fourth quarter, including the Fed's future course, the outlook for Europe's stalling economy and a slowdown in growth in China, they said.

"You should expect more volatility than we've had in the past couple years, and this week is a bit of a taste of that," said Russ Koesterich, chief investment strategist at BlackRock.

For Friday "it looks like the market has quieted down," Mr. Koesterich said. "A couple things are helping--the GDP print was in line, and also we didn't see a lot of follow-through selling overseas."

Shares of Janus Capital Group Inc. surged 39%. Bill Gross, co-founder of Pacific Investment Management Co., will join Janus next week. U.S.-traded shares of Allianz SE, the German insurer that owns Pimco, fell 6.2%.

In other corporate news, BlackBerry Ltd. posted earnings results, which included a smaller-than-expected loss and a sharp drop in revenue. Shares rose 4%.

Shares of Apple Inc. rose 2.4%. The company has been defending itself against reports that its new, larger iPhone bends easily in people's pockets. The company also released an new update of software for its mobile devices after yanking its previous update.

Corrie Driebusch contributed to this article

Write to Dan Strumpf at daniel.strumpf@wsj.com

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