Dow gunning for another record

NEW YORK (CNNMoney.com) -- Stocks rallied Friday afternoon, pushing the Dow Jones industrial average back into record territory, as investors cheered the latest merger news from Microsoft and talk of a deal involving General Electric.

The Dow (up 65.18 to 13,541.90, Charts) climbed about 0.5 percent with 2-1/2 hours left in the session, after hitting an intraday record of 13,550.92 before retreating a bit.

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The broader S&P 500 index (up 8.32 to 1,521.07, Charts) added 0.5 percent, moving closer to its all-time high from March 2000. The tech-fueled Nasdaq composite (up 16.50 to 2,555.88, Charts) also added nearly 0.6 percent.

Stocks slipped Thursday, with the Dow giving up attempts at a third straight record close due to rising oil prices and mixed economic news. But Friday was more positive, thanks to the latest spate of corporate deals.

Since the late February selloff, stocks have been on a tear, driven by better-than-expected quarterly earnings and a slew of mergers and corporate deals. Those factors are likely to remain in place, at least for the time being.

"The market is up because of the deals," said Greg Church, president at Church Capital.

Church said that more than a dozen S&P 500 components have been taken out or are in talks to be taken out by private equity over the last few months, and that level of deal making is going to continue to boost the broader market.

After roughly seven straight weeks of gains, the Dow is near an all-time high, the S&P 500 is getting close to its all-time high and the Nasdaq is at a more than six-year high.

Because the major gauges are touching records, there has been some nervousness that stocks could be in for a big pullback. But Church said any pullback could be tempered because there is plenty of money pouring into stocks.

General Electric (up $0.57 to $37.10, Charts, Fortune 500) is reportedly close to selling its plastics business for about $11 billion, The Wall Street Journal reported, with three bidders in contention.

And Microsoft (down $0.28 to $30.70, Charts, Fortune 500) said it is buying online ad agency aQuantive (up $27.92 to $63.79, Charts) for $6 billion in cash. aQuantive shares jumped 77 percent, but Microsoft shares slipped, with analysts saying the company was paying a high premium for the ad firm.

The deal sent aQuantive competitor ValueClick (up $2.09 to $29.97, Charts) shares rallying 8 percent in active Nasdaq trade. (Full story).

In earnings news, both Nordstrom (up $0.23 to $53.40, Charts, Fortune 500) and Kohl's (up $0.79 to $74.95, Charts, Fortune 500) reported higher-than-expected quarterly earnings and boosted full-year financial targets after the close of trade late Thursday. Both stocks rose Friday.

Market breadth was positive. On the New York Stock Exchange, winners beat losers 3 to 2 on volume of 1 billion shares. On the Nasdaq, advancers edged decliners by 4 to 3 on volume of 1.3 billion shares.

On the economic front, the University of Michigan's consumer sentiment index rose to 88.7 in May from 87.1 last month, topping forecasts.

U.S. light crude oil for June delivery rose 7 cents to $64.93 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $6.30 to $663.50 an ounce.

Treasury prices slipped, pushing the yield on the 10-year note to 4.78 percent from 4.75 percent late Thursday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar trimmed losses against the Japanese yen and fell against the euro.