Stocks edged higher on Friday on talk the European Central Bank might add liquidity to shore up the region's vulnerable banking system but persisting worries about a global recession kept markets volatile.

Concerns about the sovereign debt crisis in Europe have contributed to recent equity losses, with both the Dow and S&P off more than 6 percent, and the Nasdaq down more than 5 percent this week.

In morning trade, stocks seesawed between gains and losses as investors jumped at buy or sell buttons on any indication from policymakers suggesting additional steps to support Europe's financial system.

Wall Street opened lower but later reversed course, with the Nasdaq rising as much as 1 percent

One such comment came from Ewald Nowotny, European Central Bank Governing Council member, who said it might be advisable for the ECB to add more liquidity into the banking system.

People are looking for a silver bullet of policymakers stepping in to rescue banks, and given the size of recent moves in stocks, any rumor will cause people to step into the market, said Paul Brigandi, vice president of trading at Direxion Funds in New York.

The Dow Jones industrial average was down 3.52 points, or 0.03 percent, at 10,730.31. The Standard & Poor's 500 Index was up 3.79 points, or 0.34 percent, at 1,133.35. The Nasdaq Composite Index was up 14.58 points, or 0.59 percent, at 2,470.25.

Despite its losses this week, the S&P was above an August 8 low of 1,119, which technical analysts view as a support level.

Gains in the Nasdaq were helped by strength in Internet names Yahoo Inc, up 4 percent to $14.52, and International Ltd, adding nearly 5 percent to $34.26.

Ctrip, a Chinese travel website, announced a share buyback on Thursday. Earlier this month, Yahoo replaced its chief executive and has been subject to takeover talk.

The S&P consumer staples sector was the weakest, falling 0.6 percent. Food and drink companies were the poorest performers, with General Mills Inc down 1.9 percent to $38.75 and Coca-Cola Co off 1.2 percent to $67.02.

Hewlett-Packard Co was down 4.1 percent to $21.86 a day after Meg Whitman, the former head of EBay Inc was named to run the computer and printer maker. The move was met with criticism of the company's board, which has been blamed for a series of recent missteps.

(Editing by Kenneth Barry)