Traders have decided that the stock market has suffered enough, at least for now.
After a two-day plunge, the market is ending the week with an advance Friday, suggesting that perhaps Wall Street will be successfully weaned from the Federal Reserve's easy money after all.
"Saner heads are prevailing," said Jim Dunigan, chief investment officer at PNC Wealth Management. "People are looking a little deeper into the message from the Fed — the economy is getting better," he said. "At the end of the day that's a positive."
Investors had known that sooner or later the Fed would quit spending $85 billion per month pumping money into the U.S. economy.
That money has been a big driver behind the stock market's bull run the last four years. It led to low interest rates that encouraged borrowing for everything from factory machinery to commercial airplanes to home renovations. Has the economy been great? No. Unemployment is still high and U.S. growth has been anemic. But it could have been worse. Investors were confident enough in a growing economy that U.S. stocks hit all-time highs in the past month.
Then on Wednesday, the Fed said it would aim to turn off that spigot next year as long as the economy is strong enough.
Just because investors knew it was coming doesn't mean they liked it. The Dow dropped 560 points on Wednesday and Thursday.
Investors recovered their mojo on Friday. The Dow Jones industrial average rose 31 points to 14,791 in late afternoon trading. The Standard & Poor's 500 index was up four points to 1,591.
The gains were led by high-dividend stocks that investors favor when they want to play it safe. Makers of consumer staples, utilities, and health care companies rose the most of the 10 industries in the S&P 500 index. Only technology stocks fell.
The real question will be whether the sell-off continues next week, said Frank Fantozzi, CEO of Planned Financial Services. So far, the market's swoon this week appears to be more of an adjustment than the beginning of a long-term rout. "If the flow out of equities starts to increase, this might be the pullback we've been waiting for," he said.
The yield on the 10-year Treasury note hit 2.51 percent, up from 2.42 percent late Thursday. It has risen sharply since Wednesday as investors sold bonds in anticipation that the Fed would slow, and eventually end, its bond purchases, if the U.S. recovery continues.
The yield, which is a benchmark for interest rates on many kinds of loans including home mortgages, is at its highest level since August 2011.
Technology shares lagged the market after business software maker Oracle reported flat revenue late Thursday, even though analysts expected an increase. Oracle plunged $3.01, or 9 percent, to $30.20, the biggest drop in the S&P 500 index. Oracle is struggling to adapt as customers shift away from software installed on their own computers toward software that runs remotely.
Oracle's results are a poor omen for business spending on technology. Technology stocks in the S&P index fell 1 percent. Along with materials stocks, which also fell 1 percent, they were the biggest decliners among the 10 industry groups in the index.
The Nasdaq composite index, which is heavily weighted with technology stocks, fell 4 points to to 3,361. Apple, the biggest stock in the index, fell $4.05, or 1 percent, to $412.70. Microsoft fell 10 cents, or 0.3 percent, to $33.39.
The price of gold recovered after plunging the day before. Gold rose $5.80, or 0.5 percent, to $1,292 an ounce. Crude oil fell $1.45, or 1.5 percent, to $93.69 a barrel in New York.
The dollar rose against other currencies as traders anticipated that U.S. interest rates would rise as the Fed winds down its bond purchases.
Among other stocks making big moves:
—Darden Restaurants, which runs Olive Garden and Red Lobster, fell $1.08, or 2 percent, to $50.15 after rising expenses hurt its fourth-quarter earnings.
— Spreadtrum Communications jumped $3.73, or 17 percent, to $26.02 after the Chinese smartphone chip maker said its board is considering a buyout offer valued at about $1.39 billion from Tsinghua Holdings.
— Facebook rose 50 cents, or 2 percent, to $24.40 after saying it will add video to its popular photo-sharing app Instagram, following on the heels of Twitter's growing video-sharing app, Vine.
A Fed policy statement and comments from Fed Chairman Ben Bernanke started the selling in stocks, bonds and commodities Wednesday. Bernanke said the Fed expects to scale back its bond-buying program later this year and end it by mid-2014 if the economy continues to improve. The bank has been buying $85 billion a month in Treasury and mortgage bonds, which has made borrowing cheap for consumers and businesses. The program has also encouraged investors to buy stocks instead of bonds.
The S&P 500 is still up 12 percent, for the year, not far from its full-year increase of 13.4 percent last year.
Overseas, Japan's Nikkei index rose 1.7 percent, but other Asian markets fell. European markets slipped. France's CAC-40 fell 1.1 percent and Germany's DAX fell 1.8 percent.
AP Business Writer Bernard Condon contributed.