Wall Street rebounded on Friday after a week-long sell-off as oil prices stabilized from recent highs.

The Nasdaq Composite jumped more than 1 percent led by semiconductor issues.

Brent crude futures fell slightly to $111 a barrel, backing off highs after a source said Saudi Arabia raised its output. The futures touched a two-and-half-year high of $119.79 on Thursday.

The CBOE Volatility Index VIX <.VIX>, Wall Street's so-called fear gauge, also fell 10.5 percent to 19.05, falling below 20 after three days of sharp gains, as stock prices gained ground.

The market showed signs of recovery on Thursday afternoon, trimming early losses to close well off lows. But investors still expect a correction as steep as 10 percent after a six-month rally.

We got a little bit oversold in a very short period of time this week so it's normal to get this kind of a rebound, said James Dailey, portfolio manager of TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.

The market is likely to bounce a little more, but not too much since there is still more to the downside after such a strong rally and ongoing geopolitical concerns.

The Dow Jones industrial average <.DJI> was up 58.09 points, or 0.48 percent, at 12,126.59. The Standard & Poor's 500 Index <.SPX> was up 10.31 points, or 0.79 percent, at 1,316.41. The Nasdaq Composite Index <.IXIC> was up 31.55 points, or 1.15 percent, at 2,769.45.

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 is off 2.1 percent so far on the week and the S&P 500 is off 2 percent.

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.

In company news, Boeing Co rose 3 percent to $72.85 after the planemaker said late Thursday it won a $30 billion contract to build 179 U.S. Air Force refueling planes.

Financial stocks led gains on the S&P 500 with the sector <.GSPF> up 1.4 percent. Bank of America Corp gained 2.2 percent to $14.27 and Wells Fargo & Co rose 3.9 percent to 32.66.

FBR Capital Markets said the U.S. Federal Reserve may allow banks that have repaid bailout funds to return as much as 50 percent of their earnings to shareholders.

Economic data was mixed. While U.S. consumer sentiment rose to its highest in three years in February, helped by an improving view of the labor market recovery, the U.S. economy grew slower than initially estimated in the fourth quarter.

(Editing by James Dalgleish)