The Standard & Poor’s 500-stock index climbed to its highest level in 17 months Friday, as strong earnings and merger news helped the stock market shake off a weak consumer spending report. The three main stock gauges posted a weekly and monthly gain.

Major Market Indices

Trading was choppy as the Dow Jones industrials and the S&P bounced above and below 52-week highs for most of the day. Analysts said largely positive economic news persuaded investors that the economic recovery was on track.

“There have been two competing forces,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. “Although stocks are somewhat fairly priced, investors feel it’s reasonable to purchase securities at these levels because the news has been so good.”

The S&P’s 500 index rose 3.77 points, or 0.4 percent, to 1,050.71. It was the highest level since May 31, 2002, when the index closed at 1,067.14.

The Dow closed up 14.51 points, or 0.2 percent, at 9,801.12, for a five-day gain of nearly 219 points. The blue chips fell shy of beating a 52-week high reached on Oct. 14, when the Dow stood at 9,812.98.

Tech stocks edged lower, however. The Nasdaq composite index slipped 0.48 point, or 0.02 percent, to 1,932.21.

Before trading began, the government reported that consumers kept a tighter grip on their wallets in September, trimming spending by 0.3 percent. Analysts had expected a 0.1 percent drop. Consumer spending had risen 1.1 percent in August an 1 percent in July.

Still, Americans’ incomes rose 0.3 percent in September for the third month in a row, slightly better than the 0.2 percent increase analysts had expected.

Heavy consumer spending in the summer months helped boost the nation’s economic growth to 7.2 percent in the third quarter, the strongest performance in nearly 20 years, according to a government report released Thursday.

Stocks got some support from news that the Israeli company Teva Pharmaceutical Industries said it would acquire Sicor Inc. of Irvine, Calif., for $3.4 billion. Teva fell 79 cents to $56.92, but Sicor rose $1.81 to $26.78.

A spate of merger news, including the announcement Monday of Bank of America Corp.’s planned purchase of FleetBoston Financial Inc., has given investors more confidence in the business climate over the past few sessions.

But analysts cautioned that the market was likely due for pullbacks in the weeks ahead. With the earnings season winding down, and stocks at or near new highs, investors will have little incentive to send stocks higher.

“We are becoming very skeptical about the market’s prospects for further near term gains,” said Richard Dickson, senior market strategist at Lowry’s Research Reports in Palm Beach, Fla., in a market commentary Friday. Describing much of the past week’s trading, “the action of the market ... appeared to indicate a rally that was rapidly running out of momentum,” he stated.

On Friday, companies reporting higher earnings were rewarded.

Oil companies Anadarko Petroleum Corp. and ChevronTexaco Corp. reported third-quarter earnings ahead of analysts’ estimates. Anadarko shares rose 77 cents to $43.62, while ChevronTexaco advanced $2.54 to $74.30.

Health insurer Cigna Corp. also reported better-than-expected profits and projected that net earnings from health care would rise 10 percent this year from last. Its shares were up $9.08, or 18.9 percent, at $57.05.

And agribusiness giant Archer Daniels Midland Co. said earnings rose about 40 percent from a year ago. Its shares rose 78 cents to $14.35.

The Russell 2000 index, which tracks smaller company stocks, fell 2.15, or 0.4 percent, to 528.22.

Advancing issues outnumbered declining issues by a 5-to-4 ratio on the New York Stock Exchange, where volume was moderate.

Overseas, Japan’s Nikkei stock average closed Friday down 1.3 percent. In Europe, France’s CAC-40 dropped 0.4 percent, Britain’s FTSE 100 fell 0.3 percent while Germany’s DAX index was rose 0.5 percent.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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