US stocks ended higher on Friday after a tumultuous week in which markets clawed their way back from Monday's steep dive that was prompted by fears of a recession and unwinding of a global yen-funded carry trade.

The S&P 500 gained 0.5 percent to end at 5,344, the Nasdaq Composite also gained 0.5 percent to 16,745. The Dow Jones Industrial Average rose 0.1 percent to 39,497.

The technology sector led gains in the index for the day, while the Cboe Volatility Index, Wall Street's "fear gauge", was down on Friday after surging to 65.73 at the start of the week.

On Thursday, Fed policymakers expressed confidence that inflation was cooling enough to allow interest-rate cuts ahead, and will take their cues on the size and timing of those cuts from the economic data.

Monday's big decline followed a sharp sell-off last week as a weaker-than-expected July jobs report sparked recession fears, and the Bank of Japan's decision to hike interest rates on July 31 led to a sharp appreciation in the yen. That resulted in the unwinding of currency carry trade positions in which the yen is used to buy high-yielding assets.

"For most of the last week the negative opinions were driving sentiment and direction and those have been outweighed by a little less pessimism," in recent days, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

But, he said, "there is going to continue to be a significant amount of uncertainty and anxiety hanging over the market for the course of the next month until we get to the next Fed meeting."

Investors see a 55 percent chance that the Federal Reserve will cut interest rates by 50 basis points at its next policy meeting on September 17-18, with a 25 basis point cut seen as having a 45 percent probability, according to the CME Group's FedWatch Tool.

Investors also await next week's readings on US consumer prices and retail sales for July, which could provide fresh evidence on the chances of a soft landing for the American economy. (Reuters)