By Riva Gold and Aaron Kuriloff 

Financial shares rebounded from declines in the previous session, leading U.S. stocks higher Friday.

Bank shares had fallen as worries about Germany's largest lender weighed on markets, reflecting investors' concerns about the challenges lenders face while economic growth remains weak and low interest rates squeeze profits.

The swings came at the end of a quarter that was mostly calm in the U.S. The S&P 500 rebounded from the turbulence created by the Brexit vote to reach its first record in more than a year in early July. The index went two months without a move of 1% or more until early September, when investors sold stocks and bonds amid fears that central banks might pull back from their easy-money policies sooner than expected.

The S&P 500 advanced 3.3% since June 30.

The Dow Jones Industrial Average rose 164.70 points, or 0.9%, to 18308.15 Friday. The S&P 500 gained 0.8% and the Nasdaq Composite climbed 0.8%.

Shares of Deutsche Bank fell 9% to less than EUR10 in early European trading Friday to their lowest price in decades, before recovering to gain 6.4%.

The rebound came as an AFP report said Deutsche Bank was near a deal with U.S. officials to reach a settlement related to its dealings in mortgage securities ahead of the financial crisis for a lower-than-anticipated $5.4 billion.

The Stoxx Europe 600 rose less than 0.1%.

The moves followed reports Thursday that some big clients, including large hedge funds, moved to pull billions of dollars from Deutsche Bank amid concerns about its stability. The bank's U.S.-traded stock had fallen 6.7% on Thursday after European markets closed, and a pullback in banking shares helped send the Dow down nearly 200 points, its steepest loss in more than two weeks.

The KBW Nasdaq Bank Index of large U.S. commercial lenders climbed 1.6%. Some investors and analysts said despite problems at some banks, the financial system was stronger than before the global financial crisis.

"The odds of a large hole in bank balance sheets are pretty minimal at this point," said David Lefkowitz, senior equity strategist at UBS Wealth Management Americas. "It's possible that individual banks may need to raise more capital, but this is not necessarily a systemic problem with the global banking system."

The rebound came after worries about Deutsche Bank, whose shares are down around 50% this year, rippled across the European banking sector on Friday. The Euro Stoxx Banks index pared early losses to climb 1.1%, while shares in Commerzbank fell 1.2% as investors waited for further details on the lender's restructuring plans and job cuts.

"There are concerns about either capital raising or dividend reductions out there against a general backdrop where earnings may be improving but are still held back by modest rates of credit growth," said Larry Hatheway, chief economist and head of multiasset at GAM.

On top of that, he added, some banks are grappling with asset impairments, while the introduction of negative interest rates is pressuring net interest margins, the gap between what banks pay on deposits and charge on loans.

A steep fall in bank shares this year has helped trigger a record spate of outflows from Europe, with investors pulling money from European equity funds for a 34th consecutive week, according to fund tracker EPFR Global. European equity funds have lost around $95 billion in assets under management since February, according to Bank of America Merrill Lynch.

"From an economic backdrop, things look better...but the eurozone banking system is still an overriding question," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management.

U.S. oil prices gained 0.9% to $48.24 a barrel following two days of gains after members of the Organization of the Petroleum Exporting Countries tentatively agreed to cut production.

Ten-year Treasury yields rose to 1.605%, according to Tradeweb, from 1.556% on Thursday. Yields move inversely to prices.

Shares in Asia mostly closed lower, echoing Thursday's losses on Wall Street. The Nikkei Stock Average shed 1.5%, also weighed by data showing Japan's consumer prices fell in August for a sixth straight month.

Write to Riva Gold at riva.gold@wsj.com and Aaron Kuriloff at aaron.kuriloff@wsj.com

(END) Dow Jones Newswires

September 30, 2016 16:26 ET (20:26 GMT)