NEW YORK Encouraging news about the U.S. economy sent stocks surging into the close Friday.
A gauge of future economic activity rose more than analysts had expected, as did a measure of consumer confidence, adding to evidence that the economy is steadily recovering.
The Dow Jones industrial average closed up 121 points at 15,354. The S&P 500 gained 17 points to close at 1,667. The Nasdaq composite climbed 34 points to end the day at 3,499.
The Dow is up 1.6 percent this week and 17 percent for the year, while the S&P is up 2 percent this week and has gained 16.9 percent this year.
Friday's finish ended the fourth straight week of gains. Indexes are at record levels after surging this year on optimism about the economy and record corporate earnings. The market is also being supported by ongoing stimulus from the Federal Reserve, which is keeping long-term borrowing costs at historically low levels.
"This slow but relatively steady growth, that keeps inflation in check and keeps interest rates low, is actually a pretty healthy environment for the stock market," said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. "Right now we are very optimistic."
After some lackluster reports on the economy Thursday, including slowing manufacturing and an increase in applications for unemployment benefits, Friday's reports were a tonic for investors.
The Conference Board said its index of leading economic indicators rose 0.6 percent last month after a revised decline of 0.2 percent in March. The index is intended to predict how the economy will be doing in three to six months.
The University of Michigan's preliminary survey of consumer confidence climbed to 83.7. Economists had predicted that the gauge would climb to 76.8.
The strength of the rally in stocks has taken many by surprise, leaving investors waiting for a drop in prices to get into the market, said Jim Anderson, an investment specialist at JPMorgan. The S&P 500 index hasn't fallen for two consecutive days for a month.
"Everyone is waiting for a pullback," Anderson said. "Every client asks me, 'When are we getting a pullback?' With so many people waiting for it, and pouncing on it when it arrives, it's over so quickly."
As well as giving stocks a lift, the positive economic reports also pushed government bond yields higher. The yield on the 10-year Treasury rose to 1.95 percent from 1.88 percent Thursday as investors favored riskier assets.
The yield, which moves inversely to its prices, has jumped since May 3 after the government reported that hiring picked up sharply in April. The note started trading that day at 1.63 percent, its low for the year.
The move to riskier assets also gave small stocks a lift. The Russell 2000, an index of smaller companies, rose 1 percent to 995. The index has surged this month and is performing better than both the Dow and the S&P 500 for the year. It's up 17.2 percent so far in 2013.
Small stocks are doing well partly because they are more focused on the U.S., which is recovering, and don't rely as much on sales from recession-plagued Europe, as larger companies do.
Gold fell for a seventh straight day, dropping $22.20, or 1.6 percent, to $1,364 an ounce. The precious metal is down almost 20 percent this year and has fallen out of favor as an alternative investment as the stock market has surged this year.
The demand for gold as an alternative asset is also being undermined by a recent surge in the U.S. dollar. The U.S. currency advanced against both the euro and the yen Friday. The ICE dollar index, which measures the strength of the U.S. currency against a group of six currencies, is at its highest in two years.
The price of oil rose 86 cents, or 0.9 percent, to $96.02 a barrel.
The Nasdaq composite climbed 30 points, or 0.9 percent, to 3,495. The technology-heavy stock index got a small boost from Facebook, which climbed 19 cents, or 0.7 percent, to $26.31 on the one-year anniversary of its initial public offering.
Facebook slumped in the first four months after its market debut on concern that it wasn't doing enough to develop mobile advertising. Despite recovering since then, it's still trading below its IPO price of $38.