The data underscored a sense in the market that the economy is slowing at a reasonable pace and that inflation, a key concern of the Federal Reserve, is in check. High inflationary readings would likely make the Fed hesitant to lower short-term interest rates.
"You have a fairly benign interest rate environment which has eased the pain that oil inflicted back in the summer," said John O'Donoghue, co-head of equities at Cowen & Co. He contends the emerging economic picture and merger deals have left investors feeling emboldened and will likely help send stocks higher as the end of the year nears.
CBS' Alexis Christoforous reports that the rally is continuing because investors are riding a wave of strong earnings, big buyouts and news of tame inflation.
The Dow rose 28.76, or 0.23 percent, to 12,445.52. The Dow eclipsed its record close of 12,416.76 set Thursday, its first in nearly a month, and set a new trading high Friday of 12,486.30. Eleven of the 30 stocks that comprise the blue chip index reached fresh 52-week highs Friday.
Friday's gains were somewhat tepid, however, as declining issues outnumbered advancers 6 to 5 on the New York Stock Exchange. For the week, the Dow rose 1.12 percent, the S&P advanced 1.22 percent and the Nasdaq rose 0.81 percent.
Bonds were little changed, with the yield on the benchmark 10-year Treasury note flat at 4.60 percent, compared with late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 92 cents to $63.43 a barrel on the New York Mercantile Exchange.
The Labor Department said consumer prices were flat in November rather than up 0.2 percent as analyst had expected. Core inflation, which excludes volatile food and energy costs, was also unchanged. Lower energy prices have helped the consumer price index for the last three months. The Fed also reported a 0.2 increase in industrial production last month, the first increase after two months of declines.
O'Donoghue said the latest economic figures only add to confidence built upon during the fourth quarter from a spate of private equity and merger deals. "You're talking about very professional people that put valuations on things. They don't buy things that they deem to be expensive," he said, referring to the acquisitions.
"I think there is an enormous amount of cash in the whole system," he said, predicting the run-up in stocks will continue through the end of the year before Wall Street will re-evaluate conditions in the stock market early next year.
In corporate news, Japan Tobacco Inc. agreed to acquire Britain's Gallaher Group PLC for about $14.7 billion. The deal would give the producer of Mild Seven cigarettes a bigger stake in the Western European market. Gallaher was down 51 cents at $89.99.
Several biotechnology companies saw big moves Friday. Immunicon Corp. soared 80 cents, or 30 percent, to $3.45 after the company received clearance for a breast cancer test it makes from the Food and Drug Administration.
Genta Inc., a drug developer, fell 15 cents, or 22 percent, to 54 cents per share after the Food and Drug Administration rejected an application for Genasense after the leukemia drug candidate failed to meet its primary endpoint in a clinical trial.
Biopure Corp. fell 14 cents, or 24 percent, to 45 cents per share after an FDA advisory panel declared the Navy's proposed clinical trial of the company's blood substitute too risky and recommended the study not take place.
Meanwhile, Apple Computer Inc. was down 83 cents at $87.72 after it delayed filing its annual report with the Securities and Exchange Commission due to an investigation into stock option grants. The company said it plans to restate financial statements to record charges for compensation related to past grants.
The Russell 2000 index of smaller companies was down 1.51, or 0.19 percent, at 792.71.
Volume on the NYSE came to 2.11 billion shares compared with 1.57 billion traded Thursday. Friday was a "triple-witching" day, one of the four days of the year when three types of options contracts expire. Such days usually bring higher-than-normal volume as investors jockey for new positions.