The Dow and the S&P 500 rose on Thursday, thanks to upbeat economic data, but the Nasdaq was stagnant as investors pummeled shares of Research In Motion following downbeat results.

Anxiety about Friday's March payrolls report held gains in check. The U.S. stock market will be closed for Good Friday when the March unemployment report is released, and some investors opted to book profits before the long Easter weekend, derailing an earlier 1 percent run-up.

An index of U.S. manufacturing activity in March rose to its highest level in over 5-1/2 years, the Institute for Supply Management said. Earlier, a U.S. Labor Department report showed initial weekly claims for jobless benefits fell more than expected.

Overseas manufacturing reports, including one from China, also bolstered sentiment.

This economy in our view is bouncing back much stronger than most people expect, said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research in Cincinnati. Expectations seem to continually be a little low, especially on the manufacturing front.

Energy, materials and major manufacturers led the Dow's and the S&P 500's gains as Thursday's data suggested improving global demand for commodities.

The S&P materials index <.GSPM> jumped 1.8 percent, while Alcoa Inc rose 3.2 percent to $14.70. Caterpillar Inc shot up 1.8 percent to $63.99.

But the Nasdaq struggled as RIM, the maker of BlackBerry smart phones, slumped 7.4 percent to $68.48. The stock was the Nasdaq's top drag, a day after it posted quarterly results that lagged expectations.

SOLID DEBUT FOR SECOND QUARTER

The second quarter got off to a decent start for the stock market, with both the Dow and the S&P 500 closing at 18-month highs. The Dow Jones industrial average <.DJI> climbed 70.44 points, or 0.65 percent, to end at 10,927.07. The Standard & Poor's 500 Index <.SPX> rose 8.67 points, or 0.74 percent, to finish 1,178.10.

The Nasdaq Composite Index <.IXIC> was the session's laggard, adding 4.62 points, or 0.19 percent, to 2,402.58.

During the session, the Dow edged closer to 11,000, climbing as high intraday as 10,956.36 -- its highest level since late September 2008. The S&P 500 hit an intraday high at 1,181.43, also its highest level since late September 2008.

For the week, the Dow gained 0.7 percent; the S&P 500 rose 1 percent, and the Nasdaq edged up 0.3 percent.

In the energy sector, U.S. oil futures rose to an 18-month intraday high above $85 a barrel after the data offered signs the U.S. economy is improving.

The spike in oil prices propelled shares of energy companies higher, with Exxon Mobil , the largest U.S. oil company, up 0.9 percent at $67.61, and rival Chevron Corp up 1.1 percent at $76.69.

The S&P energy index <.GSPE> gained 1.6 percent.

Other standouts on the commodities front were mining and steel companies. Shares of gold producer Newmont Mining climbed 3.9 percent to $52.91 as U.S. gold futures raced to a two-week high.

Shares of U.S. Steel Corp jumped 3.4 percent to $65.70.

CISCO SLIPS, APPLE GETS iLIFT

But RIM's results helped investors trim some of their technology bets after the Nasdaq rallied to 19-month closing highs in March. Shares of network equipment maker Cisco Systems Inc fell 0.8 percent to $25.83, making the stock the Dow's top drag.

Apple Inc edged up 0.4 percent to hit a fresh lifetime closing high of $235.97 on the eve of the release of its hotly anticipated portable computer, the iPad. Earlier, Apple's stock also hit a record intraday high at $238.73.

Looking ahead to Friday's non-farm payrolls report, economists polled by Reuters forecast the economy added 190,000 jobs in March.

On Thursday, Goldman Sachs cut its forecast for the March payrolls report to an increase of 200,000 jobs from its previous expectation of a 275,000 gain.

About 7.78 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's estimated daily average of 9.65 billion.

Advancing stocks beat decliners on the New York Stock Exchange by a ratio of about 3 to 1, while on the Nasdaq, about five stocks rose for every four stocks that fell.

(Reporting by Ellis Mnyandu; Editing by Jan Paschal)

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