Stocks climbed in the last hour of trading as sectors that had been beaten up during the week regained ground, despite a devastating earthquake in Japan.
Dow Jones Industrial Average advanced more than 60 points, rising solidly above 12,000, after plunging 228 points on Thursdayamid global concerns.
Among Dow components, 3M and Caterpillar gained, while Verizon and AT&T fell.
The S&P 500 advanced 0.8 percent, above 1,300, while the tech-heavy Nasdaq also gained. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell more than 6 percent to nearly 20.
Among key S&P 500 sectors, energy, materials and industrials rose, while telecom fell.
The U.S. equity markets have had a muted reaction to the Japanese quake on fairly light volume, as equity markets treaded water throughout most of the session.
Still, the market is at a "crucial spot" technically, as the S&P 500 is just sitting above its 50-day moving average of 1,300.13, Joseph Benanti, managing director at Rosenblatt Securities, told CNBC.com. "If we close lower, we’ll see a follow through in the early part of next week," he said.
That softness could continue until the Federal Open Market Committee's announcement next Tuesday, where traders will look for a sense of the Fed's current thinking on its $600 billion bond buying program known as "quantitative easing 2."
"I think people are watching and waiting to see what happens next week," Benanti said.
Over the weekend, traders will remain focused on events in the Middle East, and its implications for oil prices, as well as the news flow out of Japan.
"Everybody's watching what's happening over the weekend," another trader said. "Nobody wants to make a bet one way or the other."
The earthquake in Japan, which triggered a tsunamithat swept across the northern coast of Japan and hit the coast of Hawaii and Northern California. The news rattled stocks, currencies, and oil at the start of the session. Most Japanese ADRs traded lower, while the yen first fell sharply lower, then rose as traders remembered how strongly the yen performed after a quake in 1995. Currency Shares Japan Yen Trust rose slightly.(Read more: Massive Quake Whipsaws the Yen).
Investors also focused on news of increased inflation in China, although the 4.9 percent rise was less than some had feared.
Treasury prices fell as traders feared Japan, the second largest foreign holder of U.S. Treasurys, would need to sell notes and bonds to fund rebuilding of the country, according to Jack Ablin, chief investment officer at Harris Private Bank. The 10-year Treasury added 26/32 points this week, pushing its yield to 3.397 percent.
Shares of oil ended lower, although U.S. light sweet crude closed above $100 a barrel for the eight consecutive session. London Brent crude closed below $114. While the earthquake will lead to a near-term reduction in global demand, traders remain nervous about the direction of events in the Middle East and Libya, where intense fighting continued.
According to Lipow Oil Associates, 18 percent of Japan's oil refinery capacity shut down.
Companies in Japan are starting to assess the damage of the earthquake and flooding. But,
Nissan reports there was damage at four of its plants while Toyota also stopped output at some of its plants.