Reports showing an unexpected slowdown in manufacturing growth and an upswing in construction spending fed optimism about the economy's health and a possible end to the Federal Reserve's interest rate hikes. The early buying sent the Dow Jones industrials up 138 points and had the Standard & Poor's 500 and Nasdaq composite indexes near multiyear highs.

The market's momentum waned late in the day as nervous investors chose to play it safe and take money out of stocks and bonds.

The mixed economic news nonetheless showed that the economy, while tapering, continues to move forward at a healthy pace, said Jay Suskind, head trader at Ryan, Beck & Co. That bode well for investors anxious about indications from the Fed last week that it will keep lifting rates to restrain economic growth and inflation.

"I think it's the same old story: The economy certainly surprises us by how resilient it is," Suskind said, but added that most on Wall Street are focused on employment data later this week.

Today's acquisitions were led by General Motors Corp.'s deal to sell a majority stake in its auto financing unit for $14 billion. Lucent Technologies Inc. also agreed to be acquired by Alcatel SA for $13.4 billion in stock.

At the close of trading, the Dow gained 35.62, or 0.32 percent, to 11,144.94. The Dow finished the first quarter Friday with a 3.66 percent advance.

Broader stock indicators were mixed. The S&P 500 rose 2.98, or 0.23 percent, to 1,297.81, while the Nasdaq dropped 3.05, or 0.13 percent, to 2,336.74.

Bonds extended last week's losses, with the yield on the 10-year Treasury note edging up to 4.87 percent from 4.86 percent late Friday. The dollar was mostly lower against other major currencies, and gold prices rebounded.

Investors shrugged off an uptick in oil prices amid supply concerns related to political tension in Iran and Nigeria. A barrel of light crude rose 11 cents to settle at $66.74 on the New York Mercantile Exchange.

The Institute for Supply Management said its manufacturing index for March fell 1.5 points to 55.2, versus forecasts for a one-point rise. However, the index's prices paid component surged 4 points to 66.5, the highest level since November and an ominous sign for inflation.

Elsewhere, the Commerce Department said construction spending grew 0.8 percent in February, up from a 0.4 percent increase the month before and besting the consensus estimate of 0.8 percent.

Although today's economic numbers were encouraging for a market fixated on rising interest rates, traders say they are awaiting Friday's employment report from the Labor Department for a clearer signal of how fast the economy is expanding.

But until then, the market's upward momentum should carry stocks higher following a decline toward the end of last month. The start of the new quarter and strength in overseas markets should also improve Wall Street's mood, according Michael Sheldon, chief market strategist for Spencer Clarke LLC.

"We're seeing a continuation of the trends that were generally in place through much of the first quarter," Sheldon said, adding that April is traditionally the Dow's strongest month of the year. "We continue to see a number of uncertainties below the surface, but investors have mostly focused on the positives."

GM is selling a 51 percent interest in its General Motors Acceptance Corp. to an investor group led by Cerberus Capital Management for much-needed cash as it tries to turn around its business. GM, which also said March vehicle sales dropped 14.3 percent, sank $1.13 to $20.14.

Ford Motor Co. also saw its volume decline 4.6 percent, while DaimlerChrysler AG's Chrysler Group posted a 1.6 percent gain. Ford fell 19 cents to $7.77, and DaimlerChrysler added 71 cents to $58.12.

Following the combination of Alcatel and Lucent — a new name will be chosen later — the companies plan to cut about 10 percent of the total work force, or 8,800 jobs. Lucent gained 3 cents to $3.08, and Alcatel rose 81 cents to $16.21.

Verizon Communications Inc. is selling its three Caribbean and Latin American telecommunications operations to America Movil SA and Telefonos de Mexico for $3.7 billion. Verizon rose 36 cents to $34.42.

The market shifted late in the day and had declining issues ahead of advancers by 17 to 16 on the New York Stock Exchange, where preliminary consolidated volume of 2.55 billion shares topped the 2.3 billion shares that changed hands on Friday.

The Russell 2000 index of smaller companies dropped 5.92, or 0.77 percent, to 759.22.

Overseas, Japan's Nikkei stock average gained 1.6 percent. Britain's FTSE 100 added 1 percent, Germany's DAX index rose 0.9 percent and France's CAC-40 was higher by 0.66 percent.