The Dow Jones industrial average — which has surged more than 340 points over the last three days, the biggest three-day point gain since November 2004 — is now less than 40 points below its record close reached on June 4.
The three major stock indexes finished the week sharply higher, even as Friday's consumer price index showed prices rose at the fastest pace in 20 months in May as the cost of gas jumped. Investors were enthusiastic that the core CPI, which excludes often volatile food and energy prices, rose a lower-than-expected 0.1 percent. The figure, which the inflation-wary Federal Reserve watches closely, was below the 0.2 percent increase Wall Street expected.
The yield on the benchmark 10-year Treasury note fell to 5.15 percent Friday from 5.23 percent late Thursday after release of the CPI report helped ease emergent concerns that the Fed might raise rather than lower interest rates this year.
The notion of a rate hike gained traction last week when inflation concerns sent the yield on the 10-year note above 5 percent for the first time since last summer. Subsequent spikes in bond yields, which move in the opposite direction as prices, roiled stock markets last week and early this week.
"Today's numbers showed us that the little spook we had last week and earlier this week was misplaced," said Rob Lutts, president and chief investment officer at Cabot Money Management Inc.
The Dow jumped 85.76, or 0.63 percent, to close at 13,639.48.
Broader stock indicators also rose Friday. The Standard & Poor's 500 index rose 9.94, or 0.65 percent, to 1,532.91, moving near its record close of 1,539.18, hit June 4.
The Nasdaq composite index, still well off its record levels reached during the dot-com boom, rose 27.30, or 1.05 percent, to 2,626.71.
The dollar was mixed against other major currencies, while gold prices rose.
Lutts contended that concerns about inflation have been overblown and that increased trade and further intertwining of world economies will stave off major spikes in prices.
"What you're getting is a contribution of hundreds of millions of lower-cost workers coming into our economy. It's very positive for all economic activity," Lutts said.
Among other economic news, the Fed reported industrial production remained flat following a 0.4 percent jump in April. A slowdown had been expected amid a drop in output by utilities in May as weather proved milder than in April.
A reading on the current account deficit, which reflects not only trade in goods and services but also investment flows between countries, showed an increase as oil prices climbed. The Commerce Department said the imbalance in the current account increased 2.5 percent to $192.6 billion in the January-to-March period, compared with $187.9 billion in the fourth quarter. The increase was slightly below what analysts had been expecting.
Amid its enthusiasm over the week's inflation readings, Wall Street looked past a preliminary Reuters/University of Michigan reading on June consumer sentiment that showed the public was not as upbeat as last month.
Inflation worries have abated somewhat despite rising energy prices. Light, sweet crude rose 35 cents to $68.00 a barrel on the New York Mercantile Exchange.
"Although everybody says the proportion of a person's pay that goes to transportation and gas costs has been declining, we still think people feel the pinch of that in their wallets," said Kim Caughey, equity research analyst at Fort Pitt Capital Group, Pittsburgh, Pa. "We are still concerned about inflation."
In corporate news, Goldman Sachs raised its rating on chip maker Intel to "buy" from "neutral," saying an increase in outsourcing by rival Advanced Micro Devices Inc. could benefit Intel. Intel rose $1.01, or 4.4 percent, to $24.24, making it the biggest gainer among the 30 stocks of the Dow industrials. AMD slipped 15 cents to $13.63.
Penn National Gaming Inc. jumped $10.98, or 21.5 percent, to $62.12 after the racetrack and casino operator agreed to be acquired by two investment companies in $6.1 billion cash deal. Fortress Investment Group LLC and Centerbridge Partners LP will also assume about $2.8 billion of the company's debt.
Monsanto Co. jumped $1.55, or 2.5 percent, to $64.86 after the world's largest seed company raised its full-year earnings forecast based on a preliminary review of third-quarter performance.
Gun maker Smith & Wesson Holding Corp. rose $1.24, or 8.3 percent, to $16.15 after reporting stronger-than-expected fiscal fourth-quarter profit and sales. The company also raised its full-year profit and sales forecasts.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 2.04 billion shares, up from 1.45 billion Thursday. Volume was inflated somewhat by the quarterly expiration of stock options, what's known as a quadruple witching day.
The Russell 2000 index of smaller companies rose 11.07, or 1.32 percent, to 848.19.
Overseas, Japan's Nikkei stock average rose 0.72 percent after the Bank of Japan left interest rates unchanged, as expected. In Europe, Britain's FTSE 100 rose 1.24 percent, Germany's DAX index rose 2.31 percent, and France's CAC-40 rose 0.96 percent.