A day after the stock market surged and then reversed its gains, investors sent stocks higher yet again as better-than-expected economic data and the Federal Reserve's apparent resolve to monitor inflation gave the U.S. dollar a boost. The Commerce Department said consumer spending rose 0.4 percent in March, more than predicted, and the Institute for Supply Management said U.S. manufacturing contracted in April by a bit less than anticipated.

The data was not completely positive - consumer spending rose mainly due to rising prices for energy and food. Stripping out inflation, spending edged up only 0.1 percent. Meanwhile, the ISM's report also indicated that costs keep rising.

But the dollar rallied anyway, pushing the euro down more than 1 percent to $1.5451. That helped crude oil fall below $111 a barrel - alleviating some of the inflation-related anxieties in the market, given that crude recently traded near a record $120 a barrel.

"I don't know if it's all turned around, but I think oil got out of control," said Todd Leone, managing director of equity trading at Cowen & Co.

The dollar's rise comes a day after the Fed lowered key interest rates by a quarter-point but suggested inflation is a growing concern and that the economy should keep growing moderately.

"What we're seeing is that maybe the economy is not falling off a cliff, but perhaps leveling off," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. "I think the Fed (rate cutting campaign) is over with, even though the Fed's statement didn't say that."

The economic assessment statement accompanying the Fed's rate decision was unclear about its policy going forward, but it has been widely believed that the central bank would pause following a string of cuts that lowered rates by 3 percentage points since last summer.

Financial stocks, housing-related stocks, chip makers, retailers, and other sectors surged, after getting battered earlier this year due to worries about the mortgage crisis and its effect on the global economy.

In mid-afternoon trading, the Dow rose 176.03, or 1.37 percent, to 12,996.16, after briefly rising more than 200 points. The Dow has not closed above 13,000 since Jan. 3.

Broader stock indicators also advanced. The Standard & Poor's 500 index rose 19.13, or 1.38 percent, to 1,404.72, and the Nasdaq composite index rose 55.76, or 2.31 percent, to 2,468.56.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.76 percent from 3.73 percent late Wednesday.

As the dollar moved higher against other currencies, gold prices dropped and light, sweet crude oil futures fell $1.69 to $111.77 a barrel on the New York Mercantile Exchange.

Investors indeed are anticipating another gloomy reading on U.S. employment on Friday. The Labor Department's report is expected to show a 75,000 net loss in jobs for April - which would be the fourth straight month of losses - and a rise in unemployment to 5.2 percent from 5.1 percent in March. In a negative sign ahead of that data, the government said Thursday the number of newly laid off workers filing claims for unemployment benefits increased by a greater-than-expected 35,000 last week.

However, stock market participants seemed to have already taken into account current economic weakness. With the government sending stimulus checks out to taxpayers and Fed rate cuts still working their way through the financial system, many investors are confident the economy will rebound in the second half of the year.

Exxon Mobil Corp., one of the 30 Dow components, saw its shares decline $3.39, or 3.6 percent, to $89.68, after releasing a disappointing earnings report. Exxon Mobil's profit rose 17 percent to $11 billion - not as high as analysts expected, despite record-high oil prices during the first quarter. Lower production volumes caused the company's profit margins to shrink.

The world's biggest oil producer's report also caused rival Chevron Corp., another Dow component, to fall $1.53 to $94.62, ahead of its own profit report Friday.

But on the whole, corporate profits have been coming in a bit stronger over the past few weeks than the market had expected. And meanwhile, spreads between rates on riskier securities and rates on safer issues have been narrowing, implying that the credit markets are improving and getting back to normal. After the Fed's rate cut Wednesday, that pattern continued Thursday.

The Russell 2000 index of smaller companies rose 11.13, or 1.55 percent, to 727.31.

Advancing issues outnumbered decliners by 2 to 1 on the New York Stock Exchange, where volume came to 845.5 million shares.

Overseas, Japan's Nikkei stock average fell 0.60 percent. European markets were closed for a holiday.

---

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy.