But inflation concerns capped the day's rise, as government data showed wholesale prices for July increased by the largest amount in nine months thanks to higher gas prices.

The Dow Jones industrial average rose 37.26, or 0.35 percent, to 10,550.71.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 0.90, or 0.07 percent, to 1,220.24, and the Nasdaq composite index rose 8.09, or 0.38 percent, to 2,145.15.

Bond prices fell sharply, with the yield on the 10-year Treasury note rising to 4.27 percent from 4.21 percent late yesterday.

Wall Street has been looking warily for signs that higher energy costs are accelerating inflation, which could curb consumer spending, raise business costs and spark more interest rate hikes by the Federal Reserve.

The Labor Department reported today that its Producer Price Index, which measures price pressures before they reach the consumer, jumped by 1 percent in July, the biggest advance since a 1.5 percent increase last October. Rising "impact costs," including the costs of raw materials and energy, are affecting companies' earnings, said Jeanne L. Mockard, a senior portfolio manager at Putnam Investments.

But the slide in oil prices, which dropped 6 percent from Friday's peak, still cheered investors enough to send stocks higher. A barrel of light crude settled at $63.25, down $2.83, on the New York Mercantile Exchange.

The dollar was up against the euro. Gold prices fell.

The Labor Department reported that the core rate of inflation, excluding energy and food, rose by a worrisome 0.4 percent in July, the biggest increase since January. Investors are leery about rising energy prices, especially after Wal-Mart Stores Inc. said yesterday its customers were spending less because gasoline was costing them more.

The inflation number took forecasters by surprise, said Rod Smyth, chief investment strategist at Wachovia Securities. "I think the settled reaction of markets is not to get too worried about it and I think, broadly, that is right. If you look at the bond market, bond yields are up slightly, but there has not been a violent reaction."

The government reported Monday that the average nationwide price for gasoline rose to $2.55 per gallon in its latest survey, up 18 cents per gallon in just one week. And yesterday, the Department of Energy said that over the past four weeks, motor gasoline demand has averaged nearly 9.5 million barrels a day, 1.5 percent above year-ago levels.

In company news, Hewlett-Packard Co. rose $3.12 to $26.82 after its fiscal third-quarter results surpassed Wall Street expectations, though a one-time tax adjustment led to a sharp decrease in the computer maker's earnings. In the first full quarter under CEO Mark Hurd, the company reported higher sales in all its major businesses — computers, printers and services. The company, which reported after the close of regular trading yesterday, also predicted the momentum would continue in the current quarter as a corporate restructuring continues.

DaimlerChrysler AG fell 49 cents to $50.17 after German regulators said they have opened a formal investigation into possible insider trading of the company's stock. Germany's financial-services watchdog, BaFin, ran a routine check after DaimlerChrysler's stock jumped just before last month's announcement that Chief Executive Juergen Schrempp would resign.

Boeing Co. rose 75 cents to $67.02 after UPS Inc. said it ordered eight Boeing 747-400 freighter planes to "accommodate strong international volume growth," particularly in Asia. Terms of the deal were not disclosed. UPS also said it selected General Electric Co. to supply engines for the new aircraft. United Parcel Service rose 17 cents to $72.31; General Electric rose 22 cents to $34.10.

Nordstrom Inc. rose $3.18 to $34.30 after its second-quarter earnings beat Wall Street's expectations and the upscale retailer boosted its profit outlook for the year. Net income for the second quarter was $148.9 million, or 53 cents per share, up from $106.9 million, or 37 cents a share, for the comparable period last year.

Declining issues narrowly outnumbered advancers on the New York Stock Exchange, where preliminary consolidated volume was 1.88 billion shares, up from 1.56 billion at the same time yesterday.

The Russell 2000 index of smaller companies rose 0.21, or 0.03 percent, to 654.82.

Overseas, Japan's Nikkei stock average fell 0.35 percent. Britain's FTSE 100 closed down 0.56 percent, Germany's DAX index was down 0.25 percent, and France's CAC-40 was down 0.11 percent.