Google’s (GOOG) blockbuster quarter squashed slowdown fears and help lead the entire market higher Friday.

Fans enjoyed the biggest one-day Google stock rise — up $89.72, or 20%, to $539.26 — in the past two years as the Net search giant blew past earnings targets by sidestepping a big drop in U.S. paid click traffic during the three months ended March 31.

Wall Street had been a little pessimistic going into the earnings report Thursday, after ComScore (SCOR) surveys showed a third straight month of miniscule advertising traffic growth related to domestic searches. The reports helped confirm suspicions that the drag of decreased consumer spending was starting to spread beyond retail and housing to the tech sector.

But the fears of a revenue slump at Google were overestimated as the company saw strong international paid click sales, and the effects of higher prices. ComScore felt a little investor scorn, perhaps undeservedly, for its role in the Google earnings anxiety.

Google reported 20% growth in overall paid click revenue over year-ago levels, which was down from the 30% pace in the prior quarter, but well above the 1.8% U.S. rate ComScore reported for March. ComScore’s snapshot flagged the U.S. slowdown but did not capture the bigger picture, namely Google’s expansion overseas, which accounted for 51% of total sales, up from 47% a year ago.

Analysts who had braced for a slowdown going into the earnings report quickly turned bullish after Google’s earnings were released.

Jefferies analyst Youssef Squali upgraded Google to Buy from Hold because the company demonstrated it was capable of “defying economic headwinds.” Squali however, kept his stock price target at $600.

Sandeep Aggarwal, an analyst with Collins Stewart, started coverage on Google Tuesday with a neutral rating with concerns about a slowing economy and declining ad budgets. On Friday Aggarwal upgraded Google to a buy for the company’s ability to penetrate international markets and make more profitable product improvments.

Aggarwal’s price target for Google is $615.

One notable downward adjustment came from Morgan Stanley analyst Mary Meeker. Meeker, who rates Google a buy, cut her 2008 sales estimate by about 3% to $22.4 billion from $22.9 billion. Meeker said the move was a “precaution to potentially continuing paid click volatility.”

Meeker does not set price targets.

One element of Google’s big performance may reflect well on rival Yahoo (YHOO). Though Google gained market share in the first quarter at Yahoo’s expense, the health of the sector seems to be intact. This should give Yahoo some added sway in its standoff with Microsoft (MSFT) over the $42 billion proposed merger.