"The Dow has been helped by the drugs sector," said Evan Olsen, head of equity trading at Stephens Inc.
A US Food and Drug Administration panel of experts voted by a narrow margin on Friday that Merck's now-withdrawn arthritis pain killer Vioxx was safe enough to be sold in the United States despite an increased risk of heart attack and stroke. Merck's stock rose $3.76 to $32.61. The FDA's advisory panel also voted 17-13, with two abstentions, to keep Pfizer's rival arthritis drugs Celebrex and Bextra on the market. Pfizer climbed $1.74 to $26.80.
The Dow Jones industrial average was up 30.96 points, or 0.29 percent, to end at 10,785.22. The Standard & Poor's 500 Index was up just 0.84 of a point, or 0.07 percent, to finish at 1,201.59.
But the Nasdaq Composite Index was down 2.72 points, or 0.13 percent, to close at 2,058.62.
For the week, the Dow ended down 0.1 percent, the S&P 500 was off 0.3 percent and the Nasdaq fell 0.9 percent.
Worries about inflation and oil prices dogged the market during most of the session, as well as lingering concerns about higher interest rates following remarks by Federal Reserve Chairman Alan Greenspan during the week.
Government economic data showed the core US Producer Price Index - excluding food and energy prices - rose at the fastest rate in six years in January, stoking inflation and interest-rate worries. Higher rates weigh on stocks as they can cut corporate profits and consumer spending.
Another setback for stocks was the higher price of oil, with NYMEX March crude settling up 81 cents at $48.35 a barrel.
"We were blindsided this morning by the PPI, so we got off on the wrong foot, but we've come back pretty well," Olsen said. "But it's been a fairly quiet day and it has been for the last couple of days, with Greenspan speaking and heading into a long weekend."
US financial markets will be closed on Monday for the Presidents Day holiday. US bond and energy markets closed early on Friday before the long holiday weekend.
Trading was active, with 1.55 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.6 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.
Decliners outnumbered advancers on the New York Stock Exchange by about 2 to 1 and by 9 to 7 on Nasdaq.
The expiration of February's options didn't have much impact on Friday's trading, according to Olsen. February individual equity options, some index options and single-stock futures stopped trading at Friday's close, and sometimes create volatility as traders unwind positions.
"We haven't had any dramatic swings - a lot of the unwinding feels as though it was done earlier in week," said Olsen.
As the price of oil spiked, shares of Dow component Exxon Mobil Corp jumped 2.2 percent, or $1.28, to $59.41. On Friday, Exxon Mobil overtook General Electric Co as the world's most valuable public company. The stock of Exxon Mobil's rival ConocoPhillips surged 2.2 percent, or $2.25, to $106.25.
Shares of MCI Inc shot up 8 percent, or $1.65, to $22.31 and Qwest Communications International Inc rose nearly 3 percent, or 11 cents, to $3.95 as investors cheered Qwest's move to pursue its bid for MCI, raising the prospect of a bidding war with Verizon Communications Inc, down 37 cents at $35.31.
Boeing Co, another Dow component, fell 1.6 percent, or 88 cents, to $52.78. Congressional investigators on Friday ruled against Boeing in a protest by rival Lockheed Martin Corp over a US Air Force contract to build small guided bombs, potentially worth $2.5 billion. Shares of Lockheed Martin were down 11 cents at $59.19.
Some chip-related stocks slipped and weighed on the Nasdaq.
KLA-Tencor Corp fell nearly 2 percent, or 91 cents, to $48.67, a day after semiconductor equipment industry data showed the book-to-bill ratio for US chipmaking equipment companies fell to its lowest level since November 2002.