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Stocks ended higher Friday, finding momentum at the end of a very choppy session in which concerns about global growth vied with investor willingness to scoop up shares beaten down in the recent sell-off.
But selling earlier in the week left the major gauges lower for the week, with the Dow and S&P 500 both down around 4% and the Nasdaq off around 5%.
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The Dow Jones industrial average (INDU) rose 125 points or 1.3%, after having fallen as much as 150 points earlier in the session.
The S&P 500 index (SPX) gained 16 points or 1.5% and the Nasdaq (COMP) composite gained 25 points or 1.1% after having been on both sides of breakeven throughout the session.
The CBOE Volatility index, the VIX (VIX), Wall Street's fear gauge, fell 12% to 39.88 as investor anxiety lessened. However, the VIX had fallen more substantially in the early afternoon. On Thursday, the VIX spiked to a 14-month high of 45.48.
Stocks were volatile through the session as worries about the European economy and the weak euro were countered by some buying interest now that the market is more than 10% off 2010 highs. A decline of more than 10% on a closing basis is technically considered to be a correction.
Since peaking at roughly 18-month highs in late April, the Dow had lost 10.2% and the S&P 500 had lost 12%. The Nasdaq was at a 22-month high at its peak and is down 12.9% as of Thursday's close.
Thursday's session intensified the recent wave of selling, with the three major gauges losing between 3.6% and 4.1%, making for the worst day on Wall Street since February 2009 at the height of the financial crisis. The sell-off also pushed the S&P 500 below the 200-day moving average, a key technical level traders watch.
Stocks fell again in the morning Friday, dropping below the lows from the early-May "flash crash" -- in which erroneous computer trading sent the Dow down by almost 1,000 points, before it recovered near the close.
Hitting those lows again Friday seemed to bring in some new buyers, with market pros using those earlier lows as a good point to tiptoe back into the market. But the advance Friday was never especially robust, with stocks seesawing through the session.
"We went to the flash crash intraday lows and bounced back, which is good, but I think the mindset has changed and people are going to be selling into rallies," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.
He said that the S&P 500 needs to close above the 200-day moving average within the next few sessions -- otherwise that level, around 1102, or 3% above Thursday's close, is going to become hard for the market to surpass.
What's moving: Big bank stocks sustained gains through the afternoon, with Dow components JPMorgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and American Express (AXP, Fortune 500) all rising.
A broad financial sector rally propelled the KBW Bank (BKX) sector index by 4%. Passage of the long-in-the-works Wall Street reform bill may have sparked the buying, as it removed an uncertainty hanging over the sector.
But gains on the day were broad based, with 28 of 30 Dow components ending higher. In addition to the financial shares, gainers included Boeing (BA, Fortune 500), Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500), IBM (IBM, Fortune 500), 3M (MMM, Fortune 500) and Exxon Mobil (XOM, Fortune 500).
In company news, Google (GOOG, Fortune 500) got the regulatory OK for its $750 million purchase of mobile advertising firm AdMob, following a six-month antitrust investigation. The Federal Trade Commission approved the deal since rival Apple (AAPL, Fortune 500) recently purchased a mobile advertising service, Quattro Wireless.
Market breadth was positive. On the New York Stock Exchange, winners beat losers three to one on volume of 2.3 billion shares. On the Nasdaq, advancers topped decliners by two to one on volume of 3.36 billion shares.
What's in the Wall Street bill?
Wall Street reform: On Thursday night, the Senate passed a far-reaching Wall Street reform bill that is part of legislation that aims to prevent another financial crisis.
The nearly 1,600-page bill establishes a new consumer regulatory agency, sheds light on complex financial products and provides a new way for the government to deal with so-called too big to fail financial firms.
The bill has to be reconciled with a similar measure the House of Representatives passed in December before it can be sent to President Obama to sign.
Company news: Dell (DELL, Fortune 500) reported higher quarterly earnings and revenue that topped expectations, after the close of trading Thursday. Strong business spending fueled the sales gain. However, the company's gross margins, a key measure of profitability, were lower than what many analysts were expecting. Dell shares fell 6.8% Friday.
Job market: More than half of all states saw lower unemployment rates last month, according to state-by-state figures released Friday morning.
Euro/dollar: The euro gained 0.7% versus the dollar, rising for the third day in a row, although investors don't seem to be taking any comfort from the modest recovery in the European currency. The euro has seesawed over the last few days after plunging to a four-year low of $1.2234 on Monday.
The dollar rose 0.4% versus the yen.
World markets: Markets in Europe cut bigger losses to close with modest declines. The British FTSE 100 fell 0.2%, the German DAX lost 0.7% and the French CAC 40 ended barely lower.
Asian markets were mixed. The Japanese Nikkei fell 2.5%, but China's Shanghai Composite turned higher, gaining 1%. Hong Kong markets were closed.
Commodities: U.S. light crude oil for July delivery fell 76 cents to settle at $70.04 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell $12.50 to settle at $1,176.10 an ounce.
Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.20% from 3.26% late Thursday. Treasury prices and yields move in opposite directions.
