NEW YORK -- Encouraging news about the U.S. economy extended the stock market's rally Friday.
A gauge of future economic activity rose more than analysts had expected, as did a measure of consumer confidence, adding to evidence that the economy is steadily recovering.
Stocks closed higher for a fourth straight week. Indexes are at record levels after surging this year on optimism about the economy and record corporate earnings. The market is also being supported by ongoing stimulus from the Federal Reserve, which is keeping long-term borrowing costs at historically low levels.
"This slow but relatively steady growth, that keeps inflation in check and keeps interest rates low, is actually a pretty healthy environment for the stock market," said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. "Right now we are very optimistic."
General Motors rose $1.03, or 3.2 percent, to $33.42. The automaker's stock is trading above the $33 price of its November, 2010 initial public offering for the first time in two years.
Northrop Grumman gained $3.17, or 3.2 percent, to $82.19 after the defense contractor said its board approved the repurchase of another $4 billion in stock, and that it plans to buy back a quarter of its outstanding shares by the end of 2015.
The Dow Jones industrial average rose 121.18 points, or 0.8 percent, to 15,354.40. The index gained 1.6 percent for the week and is up 17.2 percent for the year.
The index started higher, then drifted through the rest of the morning. The index added to its gains in the afternoon, climbing about 70 points in the last two hours of the day.
The Standard & Poor' 500 index rose 15.65 points, or 1 percent, to 1,666.12. The gauge is up 2 percent this week and has gained 16.8 percent this year.
After some lackluster reports on the economy Thursday, including slowing manufacturing and an increase in applications for unemployment benefits, Friday's reports were a tonic for investors.
The Conference Board said its index of leading economic indicators rose 0.6 percent last month after a revised decline of 0.2 percent in March. The index is intended to predict how the economy will be doing in three to six months.
The University of Michigan's preliminary survey of consumer confidence climbed to 83.7. Economists had predicted that the gauge would climb to 76.8.
The strength of the rally in stocks has taken many by surprise, leaving investors waiting for a drop in prices to get into the market, said Jim Anderson, an investment specialist at JPMorgan. The S&P 500 index hasn't fallen for two consecutive days in a month.
"Everyone is waiting for a pullback," Anderson said. "Every client asks me, `When are we getting a pullback?' With so many people waiting for it, and pouncing on it when it arrives, it's over so quickly."
As well as giving stocks a lift, the positive economic reports also pushed government bond yields higher. The yield on the 10-year Treasury rose to 1.96 percent from 1.88 percent Thursday as investors favored riskier assets.
The yield, which moves inversely to its prices, has jumped since May 3 after the government reported that hiring picked up sharply in April. The note started trading that day at 1.63 percent, its low for the year.
The move to riskier assets also gave small stocks a lift. The Russell 2000, an index of smaller companies, rose 10.94 points, or 1.1 percent, to 996.28. The index has surged this month and is performing better than both the Dow and the S&P 500 for the year. It's up 17.3 percent so far in 2013.
Small stocks are doing well partly because they are more focused on the U.S., which is recovering, and don't rely as much on sales from recession-plagued Europe, as larger companies do.
Gold fell for a seventh straight day, dropping $22.20, or 1.6 percent, to $1,364 an ounce. The precious metal is down almost 20 percent this year and has fallen out of favor as an alternative investment as the stock market has surged this year.
The demand for gold as an alternative asset is also being undermined by a recent surge in the U.S. dollar. The U.S. currency advanced against both the euro and the yen Friday. The ICE dollar index, which measures the strength of the U.S. currency against a group of six currencies, is at its highest in two years.
The price of oil rose 86 cents, or 0.9 percent, to $96.02 a barrel.
The Nasdaq composite climbed 33.72 points, or 1 percent, to 3,498. The technology-heavy stock index got a small boost from Facebook, which climbed 12 cents, or 0.5 percent, to $26.25 on the one-year anniversary of its initial public offering.
Facebook slumped in the first four months after its market debut on concern that it wasn't doing enough to develop mobile advertising. Despite recovering since then, it's still trading below its IPO price of $38.
Two software companies had more success in their stock market debuts on Friday. Marketo surged $10.10, or 77.7 percent, to $23.10 on its stock market debut. Tableau software rose $19.75, or 63.7 percent, to $50.75 on its first day of trading.
The standout performance made the two companies the two best performing IPOs of the year. So far, 22 companies have prices stock sales in May, making this the biggest month for stock market debuts since November 2007, according to Renaissance Capital.
Among other stocks making big moves;
-- J.C. Penney fell 78 cents, or 4.2 percent, to $18.01 after the retailer reported a loss that was worse than analysts' already dismal estimates. The retailer is reeling from the fallout from a failed turnaround plan orchestrated by its former CEO Ron Johnson, who was ousted last month after less than a year and a half on the job.
-- Autodesk fell $2.67, or 6.7 percent, to $37.11, after the design software company posted disappointing first-quarter results and lowered its forecasts for the year.