A strong showing by Caterpillar and other U.S. industrials' shares led the market higher on Friday, putting the Dow on track for its best month since December.

The blue-chip average was up 4 percent for the month while the S&P has risen 2.7 percent and the Nasdaq 3.2 percent, also heading for its best month of the year.

April's gains, however, were limited by losses at Microsoft Corp , the Nasdaq index's most heavily traded stock, and BlackBerry maker Research in Motion .

Heavy machinery manufacturer Caterpillar Inc climbed after reporting a fivefold increase in quarterly profit and raising its full-year forecast.

This is another sign of how manufacturing is leading the economy, said Eli Lustgarten, senior research analyst for the industrial machinery sector at Longbow Securities in St. Louis. We think Caterpillar is fairly valued, but you have to be impressed with what they delivered. No matter what, this will be a good year for them.

The stock was the top gainer on the Dow, advancing 2.4 percent to $115.35, reaching an all-time high during the session. The S&P industrial sector <.GSPI> was the top-performing sector, up 0.4 percent. Caterpillar is up more than 20 percent so far this year while the industrial sector is up 11 percent.

Microsoft slumped 3.8 percent to $25.70 and was the Dow's biggest loser a day after it reported a dip in quarterly Windows sales, mirroring a recent downturn in personal computers. U.S.-listed shares of RIM shed 13.5 percent to $48.94 after cutting its first-quarter forecasts.

The Dow Jones industrial average <.DJI> was up 64.98 points, or 0.51 percent, at 12,828.29. The Standard & Poor's 500 Index <.SPX> was up 3.34 points, or 0.25 percent, at 1,363.82. The Nasdaq Composite Index <.IXIC> was up 1.98 points, or 0.07 percent, at 2,874.51.

Robust corporate earnings, ample liquidity from the Federal Reserve and the prospect of ultra-low interest rates for the rest of the year have sparked bullishness, pushing the Nasdaq to a 10-year high and the S&P 500 more than 8 percent higher this year. Major indexes also hit new yearly highs during the week.

With May, the market is heading into a typically weak period. May has been the fourth weakest month for the Dow, averaging a 0.2 percent gain since 1950, according to the Stock Trader's Almanac. It also normally marks the start of the worst six months of the year for the industrials.

With earnings largely behind us and with the results both good and bad, I expect that we'll see a pullback in equity markets, largely led by an increase in the dollar, said Marshall Gause, chief executive officer at the Denver-based Geneva Fund Partners, who described the dollar's fall as unprecedented.

The dollar held near a three-year low against a basket of currencies.

Merck & Co Inc reported higher-than-expected quarterly earnings, fueled by strong sales of drugs for diabetes, asthma and rheumatoid arthritis, while Chevron Corp reported a jump in earnings as oil prices surged.

Shares of Merck rose 0.5 percent to $35.98 while Chevron added 0.5 percent to $109.32. Both stocks are Dow components.

(Editing by Kenneth Barry)