NEW YORK (CNN/Money) - Blue chips rose near the close Friday after a U.S. regulatory panel ruled that Merck's Vioxx was safe enough to return to market.

But the broader market struggled as investors digested a surprise rise in a key inflation indicator and geared up for a three-day holiday weekend

The Dow Jones industrial average (up 30.96 to 10,785.22, Charts) added 0.3 percent. The broader Standard & Poor's 500 (up 0.84 to 1,201.59, Charts) index ended little changed and the Nasdaq composite (down 2.72 to 2,058.62, Charts) lost a few points.

For the week, the Dow and S&P 500 saw small declines, while the Nasdaq registered a bigger loss.

Bonds tanked and the dollar was mixed versus other major currencies.

Volume was very light, with many Wall Street professionals skipping out early ahead of the three-day holiday weekend. U.S. financial markets are closed Monday for President's Day. Bond and commodity markets closed early Friday.

"Today was pretty skewed because of the gains in Merck and Pfizer at the end," said Paul Levine, president at Lifetime Financial Services. "Without that, the Dow would have been down today."

Stocks had been fairly flat throughout the session as investors mulled interest-rate implications in the day's surprisingly strong producer price index, and kept an eye on spiking oil prices.

Strength in commodities stocks, materials and health care throughout the day vied with weakness in technology and financials, leaving stocks mixed.

But blue-chips found momentum near the close thanks to a rally in the drug sector. Merck spiked in the last 30 minutes of the session as a U.S. Food & Drug Administration advisory panel ruled its Vioxx painkiller was safe for the market. Pfizer received some good news, too. (For more on this story, click here.

Inflation and interest rates are bound to remain in focus next week, and are likely to continue to drag on markets. Financial markets resume business Tuesday, with a read on consumer confidence. Investors will get hit with the latest read on consumer prices (CPI) on Wednesday, and later in the week, the revised read on fourth-quarter gross domestic product growth is due.

"The PPI number this morning was pretty scary," Levine added. "I think CPI of late has not been reflecting the true inflation picture and that's likely to change with next week's numbers."

The government reported that PPI, which measures inflation at the wholesale level, rose 0.3 percent in January, in line with forecasts, but the core reading, excluding volatile food and energy prices, jumped 0.8 percent in January -- the biggest increase in six years. Economists thought the overall and core readings would rise just 0.2 percent.

"The PPI today obviously affected the bond market," said Robert Philips, president and chief investment officer at Walnut Asset Management. "Stocks are more neutral right now in that you have oil stocks, materials and drug stocks doing well today, and that's countering the concerns about inflation."

Investors, always sensitive to inflation indications, are particularly attuned to such signs after Alan Greenspan's two days of congressional testimony. Speaking before panels in the Senate and the House, the Fed chairman acknowledged the strength of the economy and also indicated that short-term interest rates are set to keep rising at a steady pace.

Greenspan also expressed puzzlement since yields on long-term bonds have not risen despite rising short-term rates, something the bond market has taken to heart during the last few sessions.

Due to these concerns, Treasury bonds reacted much more strongly to PPI than stocks, with the 10-year note tumbling 22/32, pushing its yield up to 4.26 percent from 4.18 late Thursday. Treasury prices and yields move in opposite directions. Bond trading ended early, due to the upcoming holiday.

The first read on consumer sentiment in February from the University of Michigan was released shortly after the start of trading. The index clocked in at 94.2 versus expectations for a read of 95.5. The index stood at 95.5 in January.

A number of drug stocks rallied, following the conclusion of a three-day meeting of a Food & Drug Administration advisory panel regarding the safety of Cox-2 inhibitors, a class of pain drugs often used in the treatment of arthritis.

The group of drugs have been under attack of late, amid reports that patients taking them have a higher rate of heart disease and stroke.

Among stock movers, Merck (up $3.76 to $32.61, Research) rallied 13 percent. The panel determined that the drugmaker's Vioxx, pulled from the market last year, does increase the risk of cardiovascular problems, but that it is safe enough to return to market, with some conditions, including a "black box" warning about the drug's potential risks

The panel also ruled that Pfizer's rival painkillers Bextra and Celebrex should both stay on the market, but most advisory members thought Celebrex should also carry a "black box" warning.

Pfizer (up $1.74 to $26.80, Research) shares rose almost 7 percent.

Shares of MCI (up $1.65 to $22.31, Research) popped 8 percent in active Nasdaq trading on news that Qwest Communications plans to offer a new bid to buy the telecom, potentially setting up a bidding war. Verizon Communications agreed Monday to buy Qwest.

Qwest (up $0.11 to $3.95, Research) shares gained, and Verizon (down $0.37 to $35.31, Research) shares inched lower.

Oil stocks rose, in tune with the commodity, sending the Philadelphia Oil Services (down 2.05 to 427.73, Charts) index 1.6 percent higher.

Among the oil stocks gaining, Exxon Mobil (up $1.28 to $59.41, Research) rose more than 2 percent.

U.S. light crude oil for March delivery rose 91 cents to settle at $48.45 a barrel on the New York Mercantile Exchange, in an abbreviated pre-holiday session.

A number of financial stocks declined, sending the AMEX Securities Broker/Dealer (down $2.48 to $147.17, Research) index down almost 1.7 percent.

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by more than five to three on volume of 1.55 billion shares. On the Nasdaq, losers beat winners by 8 to 7 on volume of 1.62 billion shares.

In currency trading, the dollar inched higher versus the yen and lower versus the euro.

COMEX gold fell 20 cents to settle at $428.40 an ounce, ending its session early ahead of the holiday.