Stocks made another break higher Friday as worries about a possible downgrade of the U.S.'s credit rating left the market on rocky ground ahead of the Memorial Day weekend.
The Dow Jones Industrial Average was up about 50 points. The S&P 500 and Nasdaq were also higher.
Reflecting the nervousness in the market, the CBOE Volatility Index , widely considered the best gauge of fear in the market, was above 30. Earlier this week, the VIX finished below 30 for the first time since September when Lehman brothers collapsed and the market embarked on its downward odyssey.
Volume is expected to be light, with many investors getting a jump on the three-day weekend. The bond market closes early at 2 pm New York time.
Major indexes finished sharply lower Thursday after investors balked at the thought the U.S. could lose its prized AAA debt rating.
The jitters emerged after Standard & Poor's downgraded the UK economy to "negative" from "stable." It not only raised doubts about the UK's credit rating but also stoked concern about the U.S.'s credit rating.
"The market views those two countries — the UK and the U.S. — as relative twins," Pimco's Bill Gross told CNBC.
But Moody's said Friday it was comfortable with its current top-tier ratingon the U.S., which helped assuage some of the concerns.
And market pros said the market overreacted Thursdaybecause, while the worries aren't completely unfounded, they are premature.
"[T]he likelihood that these two countries get downgraded will not be decided in 2009 and 2010," Michael Mewes, portfolio manager at JPMorgan Asset Management, said on CNBC.
Asian shares closed mostly lower on the economic fears and European stocks were mixed with mining shares gaining, but banks falling.
General Motors’ which has been the biggest percentage gainer on the Dow for much of the week, tumbled to the bottom of the pack, after GMAC said it could take the govenrment 17 years to shed its investment in the auto and mortgage lender if it goes public.
Investors might have to wait until next month to hear whether GM will follow Chrysler into bankruptcy. The Obama administration doesn't plan to pull it into the pits before June 1, when it is expected to deliver its verdict on the troubled automaker, a source familiar with the situation told Reuters.
Banks were mostly lower, with Bank of America and Wells Fargo both down more than 1 percent.
But some banks gained, including Fifth Third and Bank of New York Mellon.
Meanwhile, AIG chairman and CEO Ed Liddy said he will step down as soon as a replacement is found. At the same time, the company announced that it is pursuing a 1-for-20 reverse stock split, sending shares down more than 6 percent.
Elsewhere, Sears Holding shot up more than 15 percent after the department-store operator posted a surprise profit of 21 cents a share Thursday even as revenue fell 9.2 percent.
In economic news, Philadelphia Federal Reserve President Charles Plosser gave market watchers more cause for concern Thursday. Plosser said the Fed’s various economic stimulus programs put the central bank's independence at riskand opened the door to future inflation.
Fed Chairman Ben Bernanke was due to take to the stage at 2 pm New York time as he gives a commencement address at Boston College.