Stocks initially fell after news broke that special counsel Robert Mueller indicted 13 Russian nationals in and three Russian entities for allegedly interfering with the 2016 U.S. presidential election.
They then rebounded after Deputy AG Rosenstein emphasized in a press conference that these indictments had no allegations of willing support to the Russians by Americans.
"One of the key point is there's no finding that this actually affected the election results," said Art Hogan, chief market strategist at B. Riley FBR. "To the extent this is a first blush, it doesn't look market negative."
The Dow Jones industrial average briefly turned lower on the indictment news before trading about 80 points higher as of 1:48 p.m. ET. The S&P 500 traded 0.4 percent higher, while the Nasdaq composite held up by just 0.1 percent. Both the S&P 500 and Nasdaq also turned negative on the news before rebounding.
"All eyes are on DC," said Dan McMahon, director of equity trading at Raymond James. "But that being said, that's been the case for the past 13 months and look at where we are. It almost feels like the new normal."
The major indexes still remained on track to post strong weekly gains. The Dow, S&P 500 and Nasdaq are up more than 4 percent for the week. The S&P 500 and Nasdaq were still on track for their best week since 2011.
"I think the foreseeable future will be marked by volatility," McMahon of Raymond James. But "we are still of the mind that we're in a secular bull market."
Stocks closed sharply higher on Thursday after choppy trading. The Dow finished 306 points higher, while the S&P 500 and Nasdaq gained more than 1 percent.
They have also rebounded sharply from the correction levels seen last week. On Feb. 8, the major averages closed 10 percent below all-time highs set last month.
"Right now, there's a tug-of-war between the fear of missing out and the fear of getting caught," said Tom Martin, senior portfolio manager at Globalt. "There's just a bit more uncertainty and that's reflected in the volatility."
But as of Thursday's close, the S&P 500 was just 4.9 percent away from erasing those losses. The Dow and Nasdaq had to rise 5.3 and 3.3 percent, respectively, to make up the ground lost.
"Risk continues to be on despite some spotty data and continued bearish sentiment," Michael Block, chief strategist at Rhino Trading Partners, said in a note to clients. "The very happening of the recent volatile episode makes more volatility more likely, but that doesn't make it a given."
During the previous 10 sessions, the S&P 500 has posted eight moves greater than 1 percent. For context, the broad index posted only eight 1 percent moves all of last year. More volatility could be seen Friday as February options expire. These events have historically increased market volatility.
Strategists and traders have pointed to several factors as a catalyst for the market's recent sell-off. One of the most cited ones is a sharp rise in government bond rates. Others pointed to the implosion of several volatility-related products as well as algorithmic trading.
But Wall Street seemed to shake off these concerns quickly. In fact, the 10-year U.S. note yield rose to a four-year high this week before as stocks continued their march higher.
In economic news, housing starts rose 9.7 percent in January, easily surpassing analyst expectations. Import prices, meanwhile, gained 1 percent, while export prices advanced 0.8 percent. Consumer sentiment rose more than expected, according to a preliminary reading from the University of Michigan.
In corporate news, Coca-Cola shares rose 1.1 percent after the company reported better-than-expected earnings. Coca-Cola said its best-performing drinks were water and sports drinks .
Wendy's shares jumped more than 5 percent after analysts at Guggenheim upgraded them to buy from neutral, noting their valuation is more attractive after their recent pullback.