Markets were closed for the Thanksgiving holiday on Thursday, and Friday trading closed early at 1 p.m. Eastern time. Expectations for this holiday season had been lowered following drops in consumer confidence surveys.
"Take the consumer confidence readings, they're just numbers from surveys," said Paul Mendelsohn, chief investment strategist at Windham Financial Services. "But now we're finding out what consumer spending is really like, so the weekend numbers will be very important for the market."
The Dow Jones Industrial Average rallied 181 points to finish at 12,980. The S&P 500 index gained 23 points to 1,440, while the Nasdaq Composite rose 34 points to 2,596.
But for the week, the market still posted losses, with the Dow losing 1.5%, the S&P 500 down 1.2% and the Nasdaq off 1.6%.
U.S. stocks tumbled on Wednesday, with the Dow falling 211 points, as worries about bad home loans, a slumping dollar and oil near $100 a barrel led traders to take money out of the market ahead of the holiday.
With the dollar hitting a new record low against the euro and fresh two-year lows against the Japanese yen, crude-oil futures rose again, adding 57 cents a barrel to $97.85.
But commodities-related stocks such as oil majors and metals miners helped lift the market, with the Amex Oil Index up 1.3% and the Gold Bugs Index up 3.7%.
Financial stocks also posted strong gains Friday, with AIG , American Express , Citigroup Inc. and JP Morgan Chase all gaining over 3%.
A pair of banks said Thursday they will invest about $1.5 billion in French-owned bond insurer CIFG Services in what could prove to be a model for the beleaguered industry -- and provide relief to nervous debt holders.
Trading volumes showed 670 million shares trading on the New York Stock Exchange and 796 million on the Nasdaq stock exchange. Advancing issues topped decliners by 5 to 1 on the NYSE and by 21 to 6 on Nasdaq.
The retail sector was in focus on so-called Black Friday -- the day when retailers are said to become profitable for the year -- with as many as 132.9 million Americans expected to hit the stores, and 55.1 million of them to definitely shop, according to a National Retail Federation survey. Discounts may be substantial to combat declining housing markets and rising gasoline prices, analysts said.
Among retailer shares on the Dow, Wal-Mart gained 2% and Home Depot rose over 3%.
Elsewhere, electronic retailer Circuit City surged nearly 20% and Best Buy gained 1%. Clothing retailer JC Penney gained 1.2% and home retailer Bed Bath & Beyond rose 0.4%.
GMAC, 49% held by General Motors and majority-held by Cerberus Capital Management, said in a filing to the Securities and Exchange Commission late Wednesday that it was considering the sale of part of Residential Capital and also might seek to acquire an international lender, widely believed to be Britain's Northern Rock.
Cerberus also asked the New York State Supreme Court for a ruling so that it won't have to complete a $7 billion acquisition of United Rentals .
European drug stocks including GlaxoSmithKline and AstraZeneca have seen two days of gains in local markets following a Citigroup upgrade of the sector to neutral from underweight.
Among U.S. pharmaceutical stocks, Pfizer shares rose 2.8%.
By Nick Godt