After some wavering early in the day, investors ultimately decided to extend the climb today, encouraged by the Labor Department's Producer Price Index coming in flat for March, once volatile prices for energy and food were stripped out. Including energy and food, wholesale prices rose 1 percent, a smaller rise than the 1.3 percent jump in February.

The stock market's advance was dampened only slightly by the University of Michigan's consumer sentiment index, which weakened in early April and raised worries that consumers could rein in spending. The report also suggested that consumers are more uneasy about inflation than they were last month. Inflation is a concern for the stock market if it gets so high that the Federal Reserve raises rates to curb it.

Though investors decided to buy ahead of next week's first-quarter results, which the market anticipates will show slowing corporate growth, inflation concerns are likely to keep factoring into stocks' performance — especially with the Consumer Price Index slated for next week.

"Inflation is a little higher than investors would want, and the economy is a little weaker," said Michael Strauss, chief economist at CommonFund. "The equity market is put in a difficult position. The Fed might lower interest rates, but until we get closer to the easing process, stocks will see more gyrations up and down."

The Dow closed up 59.17, or 0.47 percent, at 12,612.13.

The blue chip index was helped today by news from Merck & Co., which rose $3.85, or 8.3 percent, to $50.21. The drugmaker soared after a federal judge in New Jersey dismissed a lawsuit related to its discontinued arthritis pain reliever Vioxx, and after the company raised its profit outlook for 2007.

The broader Standard & Poor's 500 index gained 5.05, or 0.35 percent, to 1,452.85, and the Nasdaq composite index rose 11.62, or 0.47 percent, to 2,491.94.

Bonds fell after the consumer sentiment data, with the yield on the benchmark 10-year Treasury note rising to 4.77 percent from 4.74 percent late Thursday.

A report from the Commerce Department that the U.S. trade deficit improved for a second straight month gave some support to stocks. Also easing some inflation jitters, crude prices retreated slightly on the New York Mercantile Exchange, falling 22 cents to $63.63 a barrel after surging earlier in the day.

Analysts predict that the next few weeks will show that U.S. companies are still posting profit overall, but that growth in the first quarter will be slower than in past years.

"The U.S. economy is weak, and margins have compressed a bit," said Brian Gendreau, investment strategist for ING Investment Management. "Earnings cannot continue at a double-digit rate forever."

But he added that so far, earnings have been coming in better than expected. A big reason, he said, is that nearly half the revenue from the 30 Dow components comes from foreign countries — growth was in many of those countries was faster than it was in the United States.

One of the few Dow components to release its earnings before next week's rush, General Electric Co. rose 20 cents to $35.38 after it posted first-quarter results that matched Wall Street projections. However, the conglomerate said profit in one of its businesses was "tempered" by its U.S. mortgage business because of subprime loans — a weak spot in the economy that has led to some big dips on Wall Street in recent months.

Technology stocks initially weakened today when Samsung Electronics Co., the world's largest memory chip maker, said its profit declined for a second straight quarter amid falling computer chip prices. Also weighing on the tech sector, Apple Inc. said it would delay the release of Leopard, the next upgrade of its Mac operating system, until October. Apple fell $1.95, or 2.1 percent, to $90.24.

But keeping alive enthusiasm about takeover activity, Morgan Stanley bought 13 hotels from Japanese carrier All Nippon Airways Co. for about $2.4 billion. The deal roughly doubles the investment bank's portfolio of hotels in Japan. Morgan Stanley slipped 8 cents to $79.99.

Also, SLM Corp., the biggest U.S. provider of student loans that is better known as Sallie Mae, is in talks with buyout firms and may be bought for more than $20 billion, according to a report in The New York Times. Its stock soared $6.01, or 14.8 percent, to $46.76.

Advancing issues outnumbered decliners by nearly 5 to 3 on the New York Stock Exchange, where volume came to 1.41 billion shares, down from 1.49 billion on Thursday.

The Russell 2000 index of smaller companies rose 4.33, or 0.53 percent, to 819.38.

Overseas, Japan's Nikkei stock average fell 1.01 percent. Britain's FTSE 100 climbed 0.72 percent, Germany's DAX index added 0.97 percent, and France's CAC-40 was rose 0.70 percent.

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