Stocks rose on Friday, bouncing back from a week-long sell-off as worries about crude supplies eased and oil prices stabilized.
The S&P 500 is still down 1.9 percent for the week, but analysts said the rebound showed equities still have substantial underlying strength. The S&P closed well off its lows on Thursday.
Analysts have been calling for a correction following a six-month rally.
The market has taken this (unrest in Libya) pretty well, said Jim McDonald, Northern Trust's chief investment strategist in Chicago.
Global markets have been pressured this week by worries the turmoil in Libya could spread to other major oil-producing countries, causing energy prices to spike at the expense of a fragile global economic recovery.
The Dow Jones industrial average <.DJI> jumped 82.04 points, or 0.68 percent, at 12,150.54. The Standard & Poor's 500 Index <.SPX> advanced 14.13 points, or 1.08 percent, at 1,320.23. The Nasdaq Composite Index <.IXIC> put on 41.70 points, or 1.52 percent, at 2,779.60.
If we see oil prices normalize back down to where they were at the end of the year because of increased stability in the Middle East that would be constructive to global growth and investors would love that. McDonald said.
Brent crude futures were up 0.8 percent at $112.23 barrel, easing from a two-and-half-year high of $119.79 on Thursday after a source said Saudi Arabia raised its oil output following days of bloody unrest in fellow producer Libya.
The U.N. Security Council was to meet to discuss sanctions against Libyan leaders who are locked in a bloody battle for survival against a popular uprising.
McDonald, whose firm is overweight on energy shares, said as long as oil prices stay below levels that would force a recession, they are good for S&P 500 earnings growth.
Adding to the day's positive tone, data showed consumer sentiment rose to its highest level in three years.
As stocks rose, the CBOE Volatility Index VIX <.VIX>, Wall Street's so-called fear gauge, dropped 10.7 percent to 19.05, falling below 20 after three days of sharp gains.
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Financial stocks led gains on the S&P 500 with the sector <.GSPF> up 1.4 percent.
(Reporting by Caroline Valetkevitch; additional reporting by Angela Moon; editing by Jeffrey Benkoe)