Stocks rose for a third straight day on Friday after tame consumer price data put aside inflation fears, while an upgrade of bellwether Intel helped fuel gains in the tech sector.
The Nasdaq climbed to its highest in more than six years, while the Dow finished the week within about 53 points of its all-time high, as favorable economic and corporate news overshadowed worries about interest rates that dominated the market earlier in the week.
The mood further brightened on Friday after news of a smaller-than-expected increase in May in the core U.S. Consumer Price Index, which excludes food and energy. That followed Thursday's report that core producer prices were in line with forecasts.
There was growing concern that we'd see higher inflation and interest rates. I don't think that's been removed, but the fears aren't as great as they were, said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Wealth Management, in New York.
The Dow Jones industrial average rose 85.76 points, or 0.63 percent, to end at 13,639.48. The Standard & Poor's 500 Index advanced 9.94 points, or 0.65 percent, to finish at 1,532.91. The Nasdaq Composite Index climbed 27.30 points, or 1.05 percent, to close at 2,626.71.
The gain for the week for the Dow was 1.6 percent, the best since the week ended May 19, while the S&P 500 was up 1.7 percent, the best since the week ended April 21, and the Nasdaq was up 2.1 percent, the best in two weeks.
In a week that started with relatively little takeover chatter, a Bloomberg News report that the Nymex was exploring a sale of itself helped resume the merger-and-acquisition optimism that has fueled the market's rally over the past few months.
Shares of the New York Mercantile Exchange, the world's largest energy market, rose 1.7 percent to $142.12.
A jump in shares of Intel Corp. triggered an advance in technology stocks after Goldman Sachs raised its rating on the world's dominant chip maker to buy from neutral.
Intel shares, which are a component of all three major indexes, rose 4.4 percent to $24.24 on the Nasdaq. It was the second-biggest gainer in the Nasdaq 100 and the S&P 500. The stock was also among the Dow's biggest advancers.
Exxon Mobil Corp., the world's biggest publicly traded oil company, topped the list of the S&P 500's major advancers and ranked second among the stocks lifting the Dow as oil prices climbed.
Exxon's stock was up 1.4 percent at $85.94. U.S. crude for July delivery rose 35 cents to settle at $68 a barrel -- the highest in nine months -- on concerns about low gasoline supplies and increased violence in the Middle East.
The core Consumer Price Index rose only 0.1 percent in May, below Wall Street's median forecast for a 0.2 percent gain.
The tame inflation reading reinforced the view that the Federal Reserve, which meets June 27-28, is likely to hold benchmark U.S. interest rates steady.
A pullback in benchmark U.S. Treasury bond yields gave investors a reason to buy shares of utilities, banks and other companies especially sensitive to interest rates.
Bond prices and yields move inversely.
A much lower-than-expected consumer sentiment index reading from the Reuters/University of Michigan survey did not spoil the Street's party mood. The major indexes briefly trimmed gains on the news that the survey's preliminary June reading was the weakest in 10 months as gasoline prices soured consumers' mood.
But investors' attention quickly shifted back to the tame inflation data and the indexes sharply extended their gains.
The Nasdaq's biggest advancer was Apple Inc., up 1.5 percent at $120.50, continuing its recent climb spurred by optimism about its soon-to-be-released iPhone.
The yield on the benchmark 10-year Treasury note fell to 5.16 percent, down sharply from its climb this week to 5.33 percent, which was above the federal funds target rate of 5.25 percent.
An S&P index of utility shares rose 1.6 percent, while an S&P index of financial companies' shares advanced 0.4 percent. Higher bond yields in the past week had dented the appeal of high dividend-paying stocks such as utilities.
Trading was heavy on the New York Stock Exchange, with about 2.05 billion shares changing hands, above last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.52 billion shares traded, above last year's daily average of 2.02 billion.
Advancing stocks outnumbered declining ones by a ratio of about 13 to 3 on the NYSE and by 2 to 1 on Nasdaq.
(Additional reporting by Jennifer Coogan and Ellis Mnyandu)