NEW YORK - Wall Street capped a week of big gains with modest moves Friday as investors grappled with surging energy prices that overshadowed news of a surprise increase in home construction.

Investors hoping for an economic rebound in the second half of the year and searching for signs that the housing market is bottoming got some relief before the market opened: the Commerce Department's report that home construction jumped 8.2 percent in April.

But investors were clearly sidetracked for much of the session by energy prices and their effect on consumer spending, which accounts for more than two-thirds of U.S. economic activity.

Retailer Abercrombie & Fitch's first-quarter earnings rose 3 percent from a year ago on stronger sales. Abercrombie said it earned $62.1 million, or 69 cents per share, in the three months ended May 3 compared with profits of $60.1 million, or 65 cents a share, a year ago. Sales rose 8 percent to $800.1 million from $742.4 million last year.

Meanwhile, the price of a barrel of oil spiked to $127.82 for a new trading record Friday.

The market's concerns appeared well-founded, with news that the continuing rise in energy and food costs is weighing on consumers. The Reuters/University of Michigan consumer sentiment reading fell to 59.5 in May -- the weakest reading since June 1980.

Investors are worried that rising energy prices could derail any rebound in the economy, said Steve Neimeth, portfolio manager for AIG SunAmerica mutual funds.

"Although the housing numbers today were generally positive, the Michigan survey was quite poor and, more importantly, a continued spike in energy and commodities is causing investors to second-guess the second-half recovery," he said.

But despite the uneasiness over energy prices, stocks posted strong gains for the week. The broader market, as measured by the Standard & Poor's 500 index, rose 2.7 percent for the week. The S&P 500 index ticked up 1.78, or 0.13 percent, to 1,425.35 on Friday.

The Dow Jones industrial average slipped 5.86, or 0.05 percent, Friday, closing at 12,986.80. For the week, the Dow rose 1.89 percent.

The Nasdaq composite index fell 4.88, or 0.19 percent, to 2,528.85 on Friday, but still jumped 3.41 percent for the week. The S&P 500 and Nasdaq remain at five-month highs.

Investors have been tracking energy prices closely, with the average U.S. retail price of gasoline around $3.787 per gallon and the average price of diesel fuel near $4.482 a gallon. Consumers and businesses are struggling with high commodities costs, despite mild readings on inflation, so Wall Street remains concerned about spending on discretionary items.

Light, sweet crude rose $2.17 to settle at a record $126.29 per barrel. Oil held to gains even after Saudi Arabia's oil minister said the country boosted production by 300,000 barrels a day last week in response to requests from customers. The Energy Department said it will stop adding to the nation's Strategic Petroleum Reserve for six months starting July 1.

David Kelly, chief market strategist at JPMorgan Funds, said investors will likely continue to worry about oil prices but that there is a sense that if the economy is in a recession it likely will prove to be a mild one. He said stocks have been able to advance from their mid-March lows because fears of worsening troubles in the credit market have receded somewhat.

Kelly said the government's economic stimulus checks that have begun arriving in mailboxes this month should help consumers absorb increased energy prices and that the rebates are leaving consumers with extra money, even with higher gas prices.

Overseas, Japan's Nikkei stock average slipped 0.23 percent. Britain's FTSE 100 finished up 0.84 percent, Germany's DAX index rose 1.07 percent, and France's CAC-40 rose 0.41 percent.