U.S. blue-chip stock prices closed at their highest levels this year on Thursday, boosted by healthy company earnings, but the dollar fell as some analysts wondered if the currency's recent rally was running out of gas.
Bond prices tumbled after demand for an auction of 10-year notes proved disappointing, but oil prices jumped in response to a forecast for higher demand and slower growth of supply.
After the closing bell, Dell Inc., the world's largest personal computer maker, clouded the picture for Friday's activity by posting a profit in line with Wall Street estimates but issuing a sales forecast for the current quarter that missed analysts' targets.
During regular trading, American International Group Inc., the world's largest insurer by market value, helped push the blue-chip Dow higher, jumping 3.9 percent a day after it said quarterly profit rose 11 percent.
The Dow Jones industrial average was up 85.50 points, or 0.80 percent, at 10,749.61. The Standard & Poor's 500 Index was up 5.02 points, or 0.42 percent, at 1,197.01. The Nasdaq Composite Index rose 0.55 point, or 0.03 percent, to 2,053.10.
In currency markets, the dollar dropped as caution extinguished early enthusiasm provoked by a report showing the U.S. trade deficit narrowed in December.
"Too many dollar bulls have been chasing the same trade," so investors chose to take profits, said Boris Schlossberg, chief fundamental strategist with Forex Capital Markets in New York.
The gap between U.S. exports and imports slimmed to $56.4 billion in December from a downwardly revised November shortfall of $59.3 billion.
But some analysts wondered whether the data really represented a trend, since the narrowing of the trade deficit appeared to result from lower oil prices, and the overall U.S. trade shortfall reached a record $617.7 billion last year.
By late afternoon in New York the euro was trading at $1.2877, up 0.6 percent from late Wednesday and not far below a session high of $1.2906, according to data. The euro had initially plumbed a session low of $1.2740 following the release of the U.S. trade report.
The dollar retraced almost all of its earlier gains against the yen to trade at 105.82 yen after hitting a fresh three-month high of 106.86 yen shortly after the trade report.