Stocks Rise; Energy Gains, Materials Fall

Stocks continued to trade higher Friday despite a hike in bank reserve requirements by China's central bank, and in the absence of major economic news or earnings.

The Dow Jones Industrial Average rose more than 40 points after fluctuating at the open. The blue-chip index hit a new multi-year high on Thursday, reaching its highest level since June 5, 2008.

Among Dow components, Cisco , Travelers and Caterpillar rose, while Pfizer and American Express fell.

The S&P 500 and the Nasdaq traded slightly higher after both reached new multi-year highs again as well on Thursday. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to about 16.25.

Among key S&P 500 sectors, energy, healthcare and industrials gained, while materials and telecom fell.

Rival stock exchanges were continuing to mull whether to launch a competiting bid for the New York Stock Exchange, just days after NYSE Euronext and Deutsche Boerse announced plans to merge, CNBC reported on Friday. The potential bidders include Nasdaq, the Intercontinental Exchange , and the CME .

In China, the People's Bank of China raised lenders' required reserves by 50 basis points, on Friday, the second such increase this year as it tries to curb inflation.

The move came as PBOC governor Zhou Xiaochuan joined G20 ministers and central bankers to discuss a reform of the currency system—with less reliance on the US dollar—and commodity prices. Host France would like to tackle speculation to limit volatility on the markets.

The G20 has set itself the ambitious goal of agreeing on how to measure imbalances in the global economy, but a final agreement is not expected when the two-day meeting concludes on Saturday. Inflation is unlikely to be on the agenda.In remarks ahead of the summit on Friday, Federal Reserve Chairman Ben Bernanke acknowledged the Fed's bond buying program to stimulate the U.S. economy may be contributing to accelerated growth in emerging markets, but he said rigid exchange rate policies share the blame.

Bernanke will join a panel of central bankers at the gathering on Friday, including European Central Bank President Jean-Claude Trichet, the Bank of England's Mervyn King and the PBOC's Zhou Xiaochuan.

Investors will continue to closely monitor political unrest in the Middle Easton Friday as crowds in Libya, Yemen, Iran and Bahrain took to the streets.

Oil prices gained, with U.S. light sweet crude rising above $87 a barrel amid the tensions in the Middle East. London Brent crude was up slightly, just under $103 a barrel.

(Read more: Crude Prices: Is the Brent-WTI Spread Unwinding?)

James Barty, head of Macro Strategy at VTB Capital told CNBC on Friday it would take a major issue in Bahrain or Saudi Arabia for the oil price to really shoot up and worry global markets.

“If the price gets to ($)120-130, that’s the kind of price that would start to worry markets. As long as the oil price remains around ($)100 it’s not an issue,” he said.

In earnings news, Campbell Soup sank after the maker of soups and snacks cut its full-year forecast, on weak soup sales.

Nordstrom fell despite reporting a 35 percent gain in fourth quarter earnings as investors focused on the upscale department store's plans for an acquisition. Barclays raised its price target on Nordstrom $48 a share from $42.

Solar stocks gained after SunPowerreported strong earningsThursday after the close, thanks to higher demand for the solar-panel maker's utility and power-plants business. At least five brokerages raised SunPower's price target, and Jefferies raised the company to "buy" from "hold."

shares rose slightly after the group ousted Jack Griffin, the head of its magazine publishing unit, after less than six months on the job.

Shares of JDS Uniphase fell after Citi cut the communications equipment maker to "hold" from "buy," citing the stock's lofty valuation in the wake of huge moves higher. Miller Tabak, however, raised its price target for the company to $38 a share from $35.

Meanwhile, Intuit's soared despite reporting a drop in second-quarter profit due to the sale of its real estate solutions business. Revenue for the maker of tax software climbed, however.

In M&A news, Citadel Broadcasting entered into exclusive negotiationswith Cumulus Media to be acquired by Cumulus for $37 a share in cash and stock, according to people close to the situation, CNBC reported on Thursday. Citadel emerged from bankruptcy in June 2010.

There were no major economic releases on the calendar Friday. The Flash Crash Advisory Commission met Friday morning and was expected to discuss a series of recommendationsfor improving market structures.

Next week will be dominated by housing news, speeches by Federal Reserve presidents, and earnings, largely from retail stores like Wal-Mart , Home Depot , and Kohl's .

In Europe, shares closed downafter the move by China, and comments by Lorenzo Bini Smaghi, a member of the executive board of European Central Bank, who reportedly said the ECB may raise rates in response to rising prices, according to Bloomberg. The FTSEurofirst300 index fell 0.1 percent.

On Tap Next Week:

MONDAY: President's Day—all markets closed.
TUESDAY:Case-Shiller Home Price Index, consumer confidence, Richmond Fed Survey; Minneapolis Fed President Kocherlakota speaks, 2-year Treasury note auction; Chicago mayoral election; before-the-bell earnings from Home Depot, Wal-Mart, Macy's, NRG Energy, Office Depot, Barnes & Noble.
WEDNESDAY: Mortgage applications, existing home sales, Philadelphia Fed President Plosser speaks, Kansas City Fed President Hoenig speaks, 5-year Treasury note auction; earnings before-the-bell from Lowe's and TJX; earnings after-the-bell from Limited Brands,, and Transocean.
THURSDAY: Durable goods orders, jobless claims, USDA agricultural trade outlook, new home sales, natural gas inventories, oil inventories, 7-year Treasury note auction, money supply; earnings before-the-bell from General Motors, Kohl's, Newmont Mining, Safeway, Sears and Target; earnings after-the-bell from AIG, First Solar, Gap and Salesforce.
FRIDAY: GDP (second reading), consumer sentiment; earnings before-the-bell from JCPenney.