NEW YORK (CNNMoney.com) -- Stocks drifted higher near midday Friday at the end of a choppy week on Wall Street, with investors caught between wanting to extend the August rally and worrying about the outlook for inflation and the economy.

The Dow Jones industrial average (up 35.22 to 11,366.66, Charts) rose about 0.3 percent and the Nasdaq composite (up 5.26 to 2,160.55, Charts) both gains 0.2 percent about 2-1/2 hours into the session.

The broader Standard & Poor's 500 (up 2.48 to 1,296.50, Charts) index also rose modestly.

Stocks slipped Wednesday and Thursday on revived worries about higher inflation that push the Federal Reserve to start raising interest rates again. Thursday's jitters were sparked partly by comments from San Francisco Federal Reserve president Janet Yellen, who said the Fed may need to keep raising rates due to rising inflation.

But the declines were also a case of classic profit-taking, with investors cashing out a bit after an unusually strong August.

The tone was more upbeat Friday morning, thanks in part to lower oil prices.

Comments from Cleveland Fed president Sandra Pianalto Friday morning also helped. Pianalto said that while inflation was worrisome, the slowing economy will help counter it, essentially what the Fed forecast at the last policy meeting.

Stocks have started off September on a down note, as is typical, with September often the worst month of the year for stocks.

"It's been a tough week," said Tom Schrader, managing director of U.S. equity trading at Legg Mason. "There hasn't been a lot of direction or economic numbers and we still have a lot of people coming back from vacation or taking their kids to school."

He said that next week could be more interesting, as the economic calendar is a little fuller, bringing reports on retail sales and consumer prices.

Lennar Corp. (down $0.81 to $42.44, Charts) slipped after the homebuilder joined the list of companies in its industry warning that quarterly earnings will miss estimates.

On Thursday, Beazer Homes (down $0.05 to $37.28, Charts) and KB Home (down $0.04 to $40.36, Charts) warned that quarterly earnings would miss forecasts amid the slowdown in housing and the overall economy.

National Semiconductor (down $0.26 to $24.13, Charts) slipped modestly after warning that current-quarter revenue will miss forecasts, due to a continued bout of sluggish sales.

Broadcom (down $0.57 to $25.86, Charts) sank 2 percent after it said it found more errors in the way it accounted for past stock options. As a result, the chipmaker said it will have to book at least twice as much as it had previously thought in additional stock-based compensation costs.

Amazon.com (up $0.51 to $30.24, Charts) inched higher. After the close Thursday, it announced a widely anticipated service that allows customers to download movies and television programs to their personal computers.

Market breadth was positive and volume was moderate. On the New York Stock Exchange, winners beat losers nine to seven as 500 million shares changed hands. On the Nasdaq, advancers beat decliners by a narrow margin as 610 million shares changed hands.

U.S. light crude oil for October delivery fell 52 cents to $66.80 a barrel on the New York Mercantile Exchange.

Treasury prices rose, lowering the yield on the 10-year note to about 4.76 percent from 4.78 percent late Thursday. Bond prices and yields move in opposite directions.

In currency trading, the dollar rose versus the euro and the yen.

COMEX gold for December delivery fell $8.90 to $616 an ounce.

More on the markets

Uh oh, here comes September

Is the Fed really done?

Worried about the economy