Stocks rose Friday after a sharper-than-expected drop in December producer prices assuaged Wall Street's fear that inflationary pressure could lead the Federal Reserve to raise interest rates aggressively. Walt Disney shares and cyclical shares such as Honeywell International Inc. helped support market indexes.

The Dow Jones industrial average (search) finished up 52.17 points, or 0.50 percent, at 10,558.00. The Standard & Poor's 500 Index (search) closed up 7.07 points, or 0.60 percent, at 1,184.52. The Nasdaq Composite Index (search) was up 17.35 points, or 0.84 percent, at 2,087.91.

However, for the week the Dow ended down 0.43 percent, marking its third consecutive week of losses. The S&P 500 slipped 0.14 percent and the Nasdaq dipped 0.03 percent.

Friday's rise marked a partial recovery from a sharp sell-off Thursday, when stocks hit fresh 2005 lows partly caused by a jump in the price of oil. Friday's gains also came on the five-year anniversary of the Dow's all-time high in 2000.

"We've had a sort of rebound from the big drop yesterday," said Alfred Kugel, chief investment strategist at Stein Roe Investment Counsel, an affiliate of Atlantic Trust. "We had a bounce in the price of stocks because we went down too far. The economic news has been very good -- we had a very low inflation number and a high industrial production number."

In economic data, a Federal Reserve (search) report showed that U.S. factories, mines and utilities boosted production by a more-than-expected 0.8 percent in December.

The Labor Department (search) said the overall Producer Price Index dropped 0.7 percent last month -- the biggest decline since April 2003. That eased concerns that the Federal Reserve will be aggressive in raising interest rates.

Industrial-related stocks were helped by the economic data, with manufacturer United Technologies Corp. (UTX) up 34 cents at $100.94, heavy-equipment maker Caterpillar Inc. (CAT) up 83 cents at $93.69, and Honeywell (HON) up 2.2 percent, or 76 cents at $35.34.

But overall, trading was quiet as dealers wound down for the long weekend. The stock market is closed Monday in observance of the birthday of the late civil rights leader, the Rev. Martin Luther King Jr. (search).

The PPI report also helped the dollar gain ground against most other currencies, though oil prices continued to rise as investors hedged against the return of wintry weather to the Northeast. A barrel of light crude was quoted at $48.60, up 56 cents, on the New York Mercantile Exchange (search).

Investors entered 2005 with a caution that surprised many analysts, but they could regain confidence with good economic data and strong earnings reports in the week ahead.

"The economic numbers today were good, we're building off that, but really, it's all about earnings next week, especially guidance for the year," said Jay Suskind, head trader at Ryan Beck & Co. "The guidance we've seen so far has been a wash, so we'll be looking for evidence that companies believe the economy will keep going."

In particular, should the Consumer Price Index (search), due on Wednesday, follow the PPI with a lower-than-expected figure, the concern over prices and inflation would abate considerably, analysts said, and Wall Street could continue to expect the Fed to raise rates in regular, quarter percentage point increments.

On Nasdaq, Internet shares gained after brokerage Piper Jaffray upgraded its rating on Ask Jeeves Inc. and raised its price target on Yahoo Inc.(YHOO). Yahoo rose nearly 4 percent, or $1.37 to $36.70 and Ask Jeeves (ASK) jumped 11 percent, or $3 to $30.04.

Meanwhile, Walt Disney Co. (DIS), the media and entertainment company whose businesses include movies, theme parks, television and consumer products, helped support the Dow, rising 2 percent to $28.29 after Merrill Lynch upgraded the stock to "buy" from "neutral", citing earnings momentum. ctations.

Insurance broker Marsh & McLennan Cos. Inc. (MMC) has offered to pay $600 million to settle New York Attorney General Eliot Spitzer's charges of bid rigging and price fixing, according to media reports. However, Spitzer is reportedly seeking $750 million and a public apology from the company. Marsh & McLennan rose $1.14 to $31.51.

Sun Microsystems Inc. (SUNW) fell 36 cents to $4.22 after the company reported a small fourth-quarter profit, but said revenues continued to fall compared with last year. Sun's sales fell short of Wall Street's forecasts.

A pair of brokerage reports issued Friday said General Motors Corp.'s (GM) 2005 outlook was optimistic, even as the automaker said 2005 profits could shrink by as much as $2 per share. Both Deutsche Bank and Credit Suisse First Boston said GM's forecasts for auto sales may be too ambitious. GM lost 19 cents to $37.13.

Boeing Co. (BA) rose 28 cents to $50.91 after the aircraft manufacturer announced it would take $617 million in one-time charges in fourth quarter. The charges stem from ending production on Boeing's 717 aircraft, which never gained traction in the market, and the Air Force 767 tanker program, to which Boeing said it remains committed.

Altria Group Inc. (MO) subsidiary Phillip Morris USA announced it would raise prices on certain cigarette brands by 10 cents per pack, matching a similar hike on its Marlboro brand made last month. Altria Group was up $1.05 at $63.35.

Around 1.3 billion shares changed hands on the New York Stock Exchange, below the 1.46 billion daily average for last year. About 2 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

Advancers outnumbered decliners on the New York Stock Exchange by about 11-to-5 and by about 2-to-1 on Nasdaq.

The Russell 2000 index of smaller companies was up 7.35, or 1.2 percent, at 617.48.

Overseas, Japan's Nikkei stock average rose 0.71 percent. In Europe, Britain's FTSE 100 closed up 0.43 percent, France's CAC-40 climbed 0.53 percent for the session, and Germany's DAX index gained 0.48 percent.

Reuters and the Associated Press contributed to this report.