Stocks closed at fresh multi-year highs on Friday shrugging off lukewarm economic news to focus on broadly strong earnings, as the Dow and the S&P 500 marked six consecutive gains for the month of April.
The Dow Jones Industrial Average rose 490.81 points, or 3.98 percent, in April, to close at 12,810.54, the highest close since May 20, 2008. On Friday, the blue-chip index gained 47.23 points or 0.4 percent.
A third of the Dow components traded at multi-year highs Friday, including Kraft, Caterpillar, Boeing, AmericanExpress, IBM, UnitedTechnologies, 3M, Johnson& Johnson,DuPont and Pfizer.
The S&P 500 rose 37.78 points or 2.85 percent in April, to close at 1,363.61, the highest close for the index since June 5, 2008. On Friday, the S&P 500 gained 3.13 points, or 0.2 percent.
The Nasdaq rose 92.47 points or 3.32 percent in April to about 2,873, the highest close for the tech-heavy index since Dec. 12, 2000. On Friday, the index edged 1.01 points higher or 0.04 percent.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose slightly to 14.77. The VIX posted its third consecutive monthly decline, losing nearly 17 percent in April.
Among key S&P 500 sectors, energy and industrials rose, while telecom and financials fell.
Traders caught their breath Friday after a week filled with earnings announcements, economic news and an unprecedented press conference by Federal Reserve Chairman Ben Bernanke.
The upshot was stocks rallied to levels not seen for up to three years or more. Aside from the major indexes, the Russell 2000 Index of small cap stocks and the Dow Jones Transportation Index both hit all-time highs. That was despite news on Thursday that the economy slowed in the first quarter, and that jobless claims remained above 400,000 for a third straight week. Steady job growth occurs when claims are less than 400,000.
"I think we’re on the road to recovery," said Jim Russell, managing director at The Collingwood Group, a financial advisory firm. But, Russell added, "I think it’s fragile, and we have to be very cautious in how we build on this."
The problem is the weak dollar, and the resulting higher cost of imported goods. As inflation in countries overseas builds, the U.S. may find it is importing more inflation than the U.S. economy can handle, Russell said.
"If we walk into an inflation spiral, maybe it’s through no fault of our own economic gains, it will shatter this recovery," he said.
Nonetheless, Russell is encouraged by strong earnings in key industries, including steel, lumber, commodities, and corrugated boxes, and by "keystone" companies, including UPS ,Microsoft and Caterpillar.
"Those earnings are coming out fairly strong and that’s why I’m encouraged," he said.