NEW YORK (CNN/Money) - Stocks staged a late-day rally Friday, leading to gains for the first week in the past five, but concerns over whether the United States will lead an attack on Iraq, and with whose backing, were likely to remain in the forefront in the week ahead.

The Dow Jones industrial average (up 158.93 to 7908.80, Charts) and the S&P 500 index (up 17.52 to 834.89, Charts) each gained 2.1 percent Friday, while the Nasdaq composite (up 32.73 to 1310.17, Charts) logged a 2.6 rise. Financial markets will be closed Monday in observance of Presidents Day.

"This is only temporary relief," Stanley Nabi, managing director at Credit Suisse Asset Management, told Reuters. "This standoff with Iraq is going to continue to fray the market, but the market is getting to a point where it's oversold."

Stocks rose for only the second time in nine sessions and ended higher for the week after falling for four consecutive weeks, as worries about a war with Iraq have unnerved investors. The specter of pending war has forced a process of slow bleeding in the market over the past month, with the major indexes all claiming declines so far this year.

But on Friday, uncertainty seemed to help the market, because, at the very least it meant that war with Iraq was not imminent. That feeling came after chief U.N. inspector Hans Blix gave his report to the U.N. Security Council, revealing no surprises, followed by a spirited response by U.S. Secretary of State Colin Powell.

As had been expected, Blix cited some violations by Baghdad of U.N. disarmament resolutions, including the existence of a missile that exceeded its prescribed range, but also said his team of inspectors found no weapons of mass destruction in Iraq. Powell then argued that Iraq is hiding weapons and that more inspections "is not the answer." (For full coverage go to CNN.com)

Many on Wall Street expect Washington now to push for a U.N. resolution that would amount to an immediate call to arms. That, in turn, is likely to face opposition and a call for more time for the inspectors by France and its allies on the Security Council. Besides France, China, Germany and Russia are calling for further inspections.

In addition to the ongoing uncertainty about Iraq, investors this week have dealt with economic concerns, differing views on fiscal policy presented by President Bush and Federal Reserve Chairman Alan Greenspan, and worries of terrorist threats that have driven some to run out and buy duct tape and plastic to seal doors and windows in the event of a biological or chemical attack.

But Friday, the uncertainty that followed the Security Council presentations, coupled with some upbeat economic news, appeared to help the market keep its head above the water.

Looking to next week, investors will have a few more economic reports to consider, including the producer price index and the consumer price index -- which are expected to rise from previous levels. But economists forecast that the Conference Board's index of leading indicators was unchanged and that the Philadelphia Fed index on manufacturing conditions within its region slipped.

Investors also will get a dose of quarterly earnings from retailers, most notably from discounter Wal-Mart Stores (WMT: up $1.51 to $49.15, Research, Estimates) Tuesday. Economists expect the retailer to post a profit of 56 cents a share for its fiscal fourth quarter, up from 49 cents in the same quarter last year.

Friday brought a trio of economic reports, two of which were better than expected, and in-line earnings from Dell Computer.

One government report showed industrial production rising 0.7 percent in January after a 0.4 percent decline in December. The same report also had capacity utilization up to 75.7 percent in the first month of the year, a number that was slightly stronger than expected.

The morning also brought a reading on business inventories in December, a number that showed a 0.6 percent increase. The jump was better than economists' expected 0.2 percent rise, after a revised rise of 0.3 percent a month earlier.

But the latest reading of the University of Michigan consumer sentiment index was lower than expected. The preliminary number for February came in at 79.2, down from the previous month's 82.4 and below economists' expectations for 81.9.

A strong earnings report from Dell (DELL: up $2.52 to $25.77, Research, Estimates) helped boost tech shares. Dell rallied more than 10 percent in heavy volume after the PC maker said late Thursday its fourth-quarter earnings rose 32 percent and that first-quarter growth will be in line with expectations, too. The report lifted other techs, including Sun Microsystems (SUNW: up $0.18 to $3.30, Research, Estimates), Intel (INTC: up $0.62 to $16.15, Research, Estimates), Cisco (CSCO: up $0.37 to $13.68, Research, Estimates) and HP (HPQ: up $0.84 to $17.79, Research, Estimates).

Shares of CNN/Money's parent, AOL Time Warner (AOL: up $0.36 to $10.51, Research, Estimates), rose nearly 4 percent after the company said merger talks between its CNN unit and the news operation of Disney's (DIS: up $0.60 to $16.73, Research, Estimates) ABC were called off late Thursday.

Winning stocks on the New York Stock exchange beat out losing shares 5 to 4 as 1.4 billion shares changed hands. Advancers also held a 5 to 4 advantage over decliners on the Nasdaq on volume of 1.3 million shares.

Treasury prices tumbled, raising the yield on the benchmark 10-year Treasury note to 3.96 percent from 3.88 percent late Thursday. The dollar slipped against the yen, but edged up against the euro.

Light sweet crude oil futures for April delivery rose 18 cents to $35.36 a barrel. Gold for April delivery shrank $5.50 to $352.20 an ounce in New York.

European markets closed higher, while Asian-Pacific stocks fell with the exception of Tokyo's Nikkei 225 index, which ended more than 1 percent higher after a surprisingly strong economic growth report.