The market is going higher, said Jim Paulsen, chief investment officer of Wells Capital Management.

"When you just step back from the day-in and day-out stuff, we've got an economy which is better than people thought on the growth side, and we've got a tame inflation environment."

Art Hogan, chief market strategist, at Jefferies & Co, and Al Goldman, chief market strategist, at A.G. Edwards, agreed with Paulsen's view.

Barring any "major, negative challenge," stocks should climb next week, said Hogan, while Goldman said losses on Thursday and Friday help the market "work off some of the short-term excess."

The housing data -- January housing starts and the February homebuilders index -- will garner special attention after the world's third-biggest bank HSBC this week warned that bad debts were increasing in the U.S.

HSBC said its bad-debt provisions would come in 20% higher than expected for 2007, for an overall charge of $10.56 billion.

The bank said its own risk projections had failed to accurately predict how many borrowers would be unable to meet their mortgage obligations as interest rates rose.

At the same time, sub-prime lender New Century Financial said it expected loan production to be 20% below 2006 levels. New Century, based in Irvine, Calif., also said it's "tightening [it's] underwriting guidelines and taking other steps to further improve fraud detection and risk management."

The news weighed heavily on the market early Thursday, although the major indexes recovered most of their losses by the close.

Michael Metz, chief investment strategist at Oppenheimer & Co., said he was "absolutely astonished" that stocks didn't drop more than they did and that such announcements should be a "natural event to trigger a correction or at least an extended consolidation in the market."

Sharper losses may have not materialized, he said, because "there's such an entrenched bullishness and there's also the feeling that it can generally be contained, and that it's specific to a certain sector and won't spread."

However, the two warnings likely are just the first to come from the sub-prime market and from the junk market in general, he said.

Al Goldman, chief market strategist at A.G. Edwards, said he doubts the cracks in sub-prime mortgages are a threat to the overall economy.

For the market to suffer significant losses, more red-flags need to be raised by financial institutions that offer higher-quality mortgage loans, he said.

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The Dow Jones Industrial Average last was up almost 19 points at 12,656.

The S&P 500 was 1.24 points higher at 1,449.55 and the Nasdaq Composite 0.31 point higher at 2,488.

On Thursday stocks closed off their worst levels, as late gains in technology and energy countered losses in the broader market in the wake of HSBC Holdings' warning that credit defaults and bad debts are on the rise in the U.S.

"I would say that we are at a juncture here where we have to get our arms wrapped around valuation," Hogan said. "We have had a great earnings season but we have had some lackluster guidance. We will probably have some muted stock moves until we get a handle on what earnings are going to look like in 2007."