But stocks gave up early gains and finished mixed as investors worried about whether soft manufacturing data meant the economy was slowing, and a weak sales report from General Motors Corp. pushed the automaker's shares lower.
"There was a little bit of excitement at the open, and then later a little concern as to whether there is really going to be enough economic strength to take things higher," said Chip Hanlon, president of Delta Global Advisors. "How much longer can the Fed keep hiking rates and economic growth continue?"
The Institute for Supply Management said its index of national factory activity fell to its slowest pace in three months in March, falling short of economists' forecasts. The number prompted debate in the market about whether it gave a reason for the Federal Reserve to stop raising interest rates, or whether economic growth is slowing, Hanlon said.
The Dow Jones industrial average finished up 35.62 points, or 0.32 percent, at 11,144.94. The Standard & Poor's 500 Index was up 2.98 points, or 0.23 percent, at 1,297.81. The Nasdaq Composite Index was down 3.05 points, or 0.13 percent, at 2,336.74.
Earlier in the day, investors had been eager to put new money to work in the market, analysts said, pushing the Dow industrials up more than 100 points to a session high of 11,247.87 and driving other indexes near 5 year-highs.
Traders also were more optimistic about corporate profits after diversified manufacturer Terex Corp. raised its quarterly and full-year profit forecast, prompting a jump of 9.1 percent, or $7.23, in its stock to $86.47 on the New York Stock Exchange.
That fueled buying of large-cap stocks, like heavy equipment maker Caterpillar Inc.and diversified manufacturer 3M Co. (MMM). Caterpillar (CAT), the Dow's biggest gainer, finished up 2.4 percent, or $1.69, at $73.50.
Earnings of S&P 500 companies are forecast to have risen about 11 percent in the first quarter, according to Reuters Estimates.
French telecommunications company Alcatel said Sunday it would acquire U.S. telecommunications equipment-maker Lucent. Alcatel's U.S.-listed shares gained 5.3 percent, or 81 cents, to $16.26 on the NYSE. Lucent's stock rose 1 percent to $3.09.
Merger and acquisition activity can signal corporate executives' belief that companies are undervalued, which whets investors' appetite for stocks.
The deal pushed up shares of other communications stocks, like Qualcomm Inc. which rose 1.1 percent, or 57 cents, to $51.18, and Broadcom Corp. which added 4.2 percent, or $1.82, to $44.98. Both trade on Nasdaq.
Blue-chip Verizon Communications Inc. (VZ) agreed to sell its Caribbean and Latin American telecom operations for $3.7 billion, sending Verizon shares up 1.1 percent, or 36 cents, to $34.42 on the NYSE.
But GM (GM), the world's largest automaker, said U.S. sales fell 14.6 percent in March. Its stock fell 5.3 percent, or $1.13, to $20.14 and helped trim the Dow's advance. Earlier, the company unveiled a $14 billion deal to sell a controlling stake in General Motors Acceptance Corp. (GOM), its finance arm, but said it would take a charge.
The Nasdaq finished lower, despite its earlier rally, as retailer Sears Holdings Corp. raised its buyout offer for Sears Canada, sending its shares down almost 1 percent, or $1.18, to $130.65.
Volume was active on the NYSE, with about 1.7 billion shares changing hands, above last year's daily average of 1.61 billion. On the Nasdaq, about 2.01 billion shares traded, above last year's daily average of 1.8 billion.
Decliners outnumbered advancers on the NYSE by a narrow ratio of 17 to 16, while on the Nasdaq, more than nine stocks fell for every five that rose.
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