THE sharemarket reversed some of Thursday's substantial losses, the biggest one-day fall since May, closing above 5000 points to end the week on a positive note.
The S&P/ASX 200 Index rose 0.8 per cent on Friday, up 38 points to 5018.1, and the broader All Ords rose 38.1 points, 0.8 per cent, to 5036.7.
On the ASX 24, the March share price index futures contract reached 4996, 29 points higher with 39,902 contracts traded.
"Overall it [Thursday's loss] seemed to be a slight hiccup," CommSec analyst Steven Daghlian said. "The market is back up and both the ASX and the All Ords have crept back up above the 5000-point mark and that is a good sign."
Deutsche Bank's head of research sales, Glenn Morgan, said Thursday's heavy losses were an overreaction to what was said in the US Federal Reserve minutes about bond purchases.
"The outlook was probably more balanced than people thought on reflection," Mr Morgan said.
A fairly optimistic tone set by Reserve Bank governor Glenn Stevens in a statement to the House of Representatives standing committee on economics on Friday also lifted sentiment, with some economists speculating that the interest rate easing cycle could be coming to an end.
Mr Stevens said the high Australian dollar had helped offset the surge in investment in the mining industry, which otherwise would have led to higher interest rates.
All sectors ended higher on Friday. Gold rose 3.5 per cent, financials 0.8 per cent and materials 0.2 per cent. The big four banks all had gains, with Westpac and NAB each closing 1.3 per cent higher.
Miners BHP Billiton and Rio Tinto finished 0.8 per cent and 0.9 per cent lower respectively but Newcrest Mining rose 1.55 per cent.
Mr Morgan said the reporting season had turned the mood on the markets more positive, after fears at the start of the year that the rally would not have been backed up by companies' earnings.
"There have been a few disappointments but our analysts have been upgrading forecasts for the next two years during reporting season, something we haven't seen for quite a while," he said. "There's still be a bit of [price-earnings] expansion, but I think we've found a floor in earnings, companies have done a terrific job on costs and if we get a better macro-economic backdrop, the leverage to the upside could be quite large."
Telstra added 6¢ on Friday to $4.56 and Woolworths jumped 42¢, 1.24 per cent, to $34.27.
Billabong shares tumbled 5¢, 5.5 per cent, to 86¢ after the troubled surfwear retailer announced a half-year loss of $536.6 million and downgraded its underlying earnings.
Oil and gas producer Santos impressed investors enough with a positive outlook for cash flow from new liquefied natural gas projects to overshadow a fall in net profit, closing up 15¢ at $12.05.