Dow, S&P claw to new record

NEW YORK (CNNMoney.com) -- The Dow industrials set a new record Friday and the S&P 500 closed in uncharted territory for the third straight day as investors cheered a solid job reading, strong manufacturing report and tame inflation.

The Dow also set a new intraday peak, but finished well off those highs as investors exercised caution in light of the recent market run-up and a spike in Treasury yields.

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The Dow Jones industrial average (up 28.77 to 13,656.41, Charts) finished 0.3 percent higher, according to early tallies. The Dow briefly touched an intraday record of 13,691.43 before pulling back.

The broader S&P 500 index (up 4.89 to 1,535.51, Charts) added 0.4 percent, marking the index's third record close in a row.

The Nasdaq composite (up 9.70 to 2,614.22, Charts) gained 0.4 percent, a new six-year high.

The Russell 2000 (up 5.43 to 852.61, Charts) small-cap index added 0.7 percent, also finishing at a new record high three days straight.

Oil rose over a dollar, bonds slid, and the dollar gained on the euro and yen.

Here's what moved the markets Friday:

"All the news this morning was uniformly good," said Jim Awad, chairman of Awad Asset Management, speaking of a solid jobs report, mild inflation and rising consumer confidence.

But Awad noted the big jump the market had last month, and said "what the market is telling you is that it had a huge May, and maybe it's time to rest for a while."

Stocks posted modest gains Thursday, at the end of an otherwise strong month on Wall Street in which all three major gauges and the Russell 2000 gained between 3 percent and 4.5 percent.

June started off on a positive note, as investors welcomed the economic news, including a better-than-expected May jobs report, a strong ISM manufacturing reading and a drop in a key measure of inflation.

The reports seemed to suggest the blend of solid growth and mild inflation that stock investors tend to prefer.

However, gains were tempered by some reluctance after the recent run - and by a big selloff in Treasury prices, which sent the yield on the benchmark 10-year note up to 4.94 percent.

"Wall Street got a good dose of news to start the month off," said Fred Dickson, chief market strategist at D.A. Davidson & Co. "Most of it was probably as good or better than what people envisioned."

However, he said that he was surprised that after the early morning rally, the advance tapered off. "I think we're starting to see signs of consolidation, but that's not surprising considering the run we've had."

Since selling off in late February, stocks have been on a tear, with the Dow and S&P 500 rising for 7 of the last 8 weeks. All three major gauges are currently on track to end this week higher too, pushing the tally for the blue-chip averages to 8 out of 9 weeks higher.

Employers added 157,000 jobs to their payrolls in May, after adding a downwardly revised 80,000 in the previous month. Economists surveyed by Briefing.com expected 135,000 new jobs.

The unemployment rate, generated by a separate survey, held steady at 4.5 percent, as expected. Average hourly earnings, the report's inflation component, rose 0.3 percent, in line with forecasts.

Separately, another inflation indicator, the core PCE deflator, rose a smaller-than-expected 0.1 percent in April. The core PCE deflator is part of the personal income income and spending report.

Personal income declined in the month, versus forecasts for a rise, while personal spending rose more than expected, the government said.

More economic news was released after the start of trading. The May ISM index, a manufacturing gauge, rose to 55.0 from 54.7 in the previous month, versus forecasts for a drop.

The May consumer sentiment index from the University of Michigan was revised down to 88.3 from an earlier reading of 88.7, but still beat estimates and rose from the previous month. Economists thought it would be revised down to 88.

Finally, the April pending home sales index posted a surprise decline of 3.2 percent, when economists were expecting it to post a slight rise of 0.4 percent. Pending home sales fell 4.5 percent in March.

In corporate news, Dell (up $0.43 to $27.34, Charts, Fortune 500) reported quarterly sales and earnings late Thursday that topped estimates. The tech leader also said it will cut about 10 percent of its work force over the next year as part of an ongoing restructuring. Shares gained about 2 percent.

Dell's good news boosted other big tech shares, including Intel (up $0.18 to $22.36, Charts, Fortune 500), Cisco Systems (down $0.03 to $26.89, Charts, Fortune 500), Advanced Micro Devices (up $0.05 to $14.32, Charts, Fortune 500) and Micron Technology (up $0.49 to $12.67, Charts, Fortune 500).

The chief financial officer of Wal-Mart Stores (up $1.71 to $49.31, Charts, Fortune 500) said that the retailer will slow down the pace of growth of its supercenter stores next year and that it will buy back $15 billion worth of its stock. Shares of the Dow component gained about 4 percent.

Brocade Communications (down $0.75 to $8.44, Charts) reported lower fiscal second-quarter profit that nonetheless topped estimates late Thursday. The computer data storage maker also issued a current-quarter revenue forecast that is short of expectations.

On Friday, Brocade agreed to pay $7 million to settle stock option back-dating charges with the Securities and Exchange Commission.

Automakers were also reporting their May sales throughout the afternoon. Ford Motor (up $0.03 to $8.37, Charts, Fortune 500) said sales fell less than expected in the month.

Market breadth was positive. On the New York Stock Exchange, winners topped losers by 2 to 1 on volume of 1.17 billion shares. On the Nasdaq, advancers topped decliners by 3 to 2 as 1.6 billion shares changed hands.

U.S. light crude oil for July delivery rose $1.07 to settle at $65.08 a barrel on the New York Mercantile Exchange.

COMEX gold for July delivery added $10.20 to settle at $676.90 an ounce.

Treasury prices tumbled, raising the yield on the 10-year note to 4.94 percent from 4.89 percent late Thursday. Bond prices and yields move in opposite directions.

In currency trading, the dollar rose versus the euro and the yen on the strong economic news.

- An earlier version of this story incorrectly stated the Dow closed at a record high Thursday. CNNMoney.com regrets the error.