NEW YORK (AP) - Wall Street notched its third straight month of gains Friday - a feat not seen in nearly two years - after investors cheered a pair of reports showing a rise in consumer sentiment and Midwest manufacturing.
"We have more positive economic data that's got investors heartened the economy is continuing to improve," said Stephen Massocca, president of Pacific Growth Equities. "Investors are pretty optimistic."
The Dow Jones industrial average closed up 139.08, or 1.6 percent, at 8,850.26. That reversed a decline in the Dow Thursday, when it lost nearly 82 points, halting a five-day rally. It also was the highest level seen since Dec. 2, 2002, when the blue chips finished at 8,862.57.
The broader market also finished sharply higher. The Nasdaq composite index rose 20.96, or 1.3 percent, to 1,595.91. That was the best level since May 31, 2002, when the tech-focused index closed at 1,615.73.
The Standard & Poor's 500 index gained 13.95, or 1.5 percent, to 963.59. It was the highest close since July 8, 2002, when the index stood at 976.98.
The three gauges also posted a third winning month, an achievement which hasn't happened since October-December 2001. In May, the Dow gained 4.4 percent, the Nasdaq advanced 9 percent and the S&P rose 5.1 percent.
For the week, the main gauges also finished higher, with the Dow up 2.9 percent, the Nasdaq 5.7 percent higher, and the S&P up 3.3 percent.
On Friday, the University of Michigan reported that its consumer sentiment index rose in May to 92.1 percent, according to Dow Jones Newswires. That is up from 86.0 percent in April, although it is lower than both a mid-month reading and the forecasts of analysts.
Meanwhile, the Purchasing Management Association of Chicago said its index of business activity rose to 52.2 in May, indicating manufacturing growth in the Midwest. Analysts said that could foreshadow an increase in the national manufacturing number, to be reported by the Institute for Supply Management on Monday.
However, the Commerce Department reported that consumer spending dipped by 0.1 percent in April. That is the largest drop since the start of the year and is a sharp reversal from March when consumers increased their spending by 0.8 percent. Economists had forecast a rise of 0.1 percent for April.
Also Friday, the government reported that the incomes of Americans were unchanged in April after a gain of 0.4 percent in the previous month, a sign of the weak job market.
"The market's been rallying in the face of some pretty tepid economic data over the past number of weeks and so to get some good news is definitely a positive," said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. "I think people are encouraged."
Investors also were upbeat after an announcement from Microsoft that it would pay AOL Time Warner $750 million to settle an antitrust lawsuit over the software giant's conduct in making its Internet Explorer the dominant Web browser.
The pact, announced late Thursday, gives AOL-Time Warner free license to Microsoft browsing software for seven years. Microsoft also would license its digital media technology to AOL, as well as work with the company to promote digital media initiatives.
AOL rose 37 cents to $15.22 in trading on the New York Stock Exchange. Microsoft rose 21 cents to $24.61 in trading on Nasdaq.
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Imclone Systems jumped $5.04 to $28.50, a gain of 19.3 percent after news reports that data soon to be reported shows the company's drug Erbitux is an effective cancer treatment.
Halliburton rose 72 cents to $23.87 after the company said Friday it agreed to settle shareholder lawsuits alleging the company employed accounting trickery to inflate its revenues. The company said the settlement would not have a material impact on its earnings.
Bank One rose 47 cents to $37.36 after announcing it has agreed to buy a U.S. life insurance business from Zurich Financial Services AG.
But Schering-Plough saw its stock decline by 45 cents to $18.45 after the drug maker said a federal grand jury was probing its marketing practices, including whether it overcharged the government for medicine.
Advancing issues outnumbered decliners by an 11-to-3 ratio on the New York Stock Exchange. Volume was heavy.
The Russell 2000 index, which tracks smaller company stocks, rose 8.37, or 1.9 percent, to 441.01.
Overseas, Japan's Nikkei stock average rose 0.6 percent. In Europe, Germany's DAX index rose 2.6 percent, Britain's FTSE 100 fell 0.9 percent, and France's CAC-40 increased 0.8 percent.
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