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M&A Fires Up Stocks

The Dow closes above 13,500, and the S&P nears an all-time high.

Updated from 4:22 p.m. EDT

Stocks climbed anew Friday and led to another record for the

Dow Jones Industrial Average

as the latest dealmaking got Wall Street's rally back on track.

The Dow rose 79.81 points, or 0.59%, to 13,556.53, putting it at yet another all-time closing high. The

S&P 500

also made an attempt at a new benchmark, jumping 10 points, or 0.66%, to 1522.75, leaving it just short of its best close of 1527.46 set back in 2000.

Meanwhile, the

Nasdaq

was better by 19.07 points, or 0.75%, at 2558.45.

"Traders want to short this rally but aren't getting a break," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "Technically, we are overbought. The momentum indicators are clearly diverging, heading down as price heads higher. Sooner or later, the bulls will have to come up for air, but the odds favor that it won't be for long."

About 2.89 billion shares changed hands on the

New York Stock Exchange

, and volume on the Nasdaq reached 2.02 billion shares. Winners outpaced losers 3 to 2.

While the major averages finish the week strong, it has been anything but an easy ride. Lopsided trading has dominated. The Dow added 230 points, or 1.6%. The S&P 500 rose 1.1% over the five sessions. The Nasdaq, however, lagged behind and ended the week slightly lower.

Merger and acquisition news supported the blue-chip averages, while semiconductor names have combined to sink the tech-heavy Nasdaq.

Deals were struck for

DaimlerChrysler's

(DCX)

Chrysler Group,

Reuters

(RTRSY)

, and

Alliance Data Systems

(ADS) - Get Alliance Data Systems Corporation Report

, among others.

On the other hand, poor earnings from

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

sank the Philadelphia Semiconductor Sector Index, which dropped 2.6% in total.

The last day of the week was no different on the M&A front. Leading the corporate news was word that

General Electric

(GE) - Get General Electric Company (GE) Report

could be close to selling its plastics division for roughly $11 billion to Saudi Basic Industries. The report appeared in

The Wall Street Journal

, and it lifted shares of GE by 43 cents, or 1.2%, to $36.96.

Elsewhere,

TheStreet Recommends

aQuantive

(AQNT)

soared 77.8% to $63.79 after

Microsoft

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said it will acquire the Internet marketer for $6 billion in cash. The deal values shares of aQuantive at $66.50, an 83% premium over its close on Thursday.

Another key story came from overseas, where the government of China said it will modestly expand the trading band for the yuan against the dollar to half a percent above and below the so-called central parity rate. The current band allows for 0.3% fluctuations.

Critics of China's trade policy have long argued that the nation's officials intentionally keep their currency undervalued relative to the greenback, giving their export industries an unfair advantage over American companies. Lately, the dollar was lower against the yen and higher against the euro.

Few earnings reports were on the calendar, but

British Airways

undefined

said earlier that it had a loss in the fourth quarter, reversing a profit a year earlier.

On the research front, Citigroup upgraded

Verizon

(VZ) - Get Verizon Communications Inc. Report

to buy from sell and took

Priceline.com

(PCLN)

to buy from hold. The firm also downgraded

Juniper Networks

(JNPR) - Get Juniper Networks, Inc. (JNPR) Report

to hold from buy.

Separately, JP Morgan lifted its rating on

NYSE Euronext

(NYX)

to neutral from underweight. The stock ended higher by 44 cents, or 0.5%, at $82.44.

Two European drugmakers received good news from the Food and Drug Administration, as the agency granted extended approvals for Lovenox from

Sanofi-Aventis

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and Seroquel from

AstraZeneca

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.

The lone release on the economic calendar was the University of Michigan's preliminary reading on consumer sentiment in May, which unexpectedly rose to 88.7 from 87.1 last month. Economists had anticipated the index would decline to 86.2.

As for commodities, energy prices ended up following a volatile session, with oil tacking on 8 cents to $64.94 a barrel. Elsewhere, Gold rose $4.80 to $662 an ounce, and silver gained 12 cents to $13 an ounce.

Shares in China ticked down in the wake of the decision on the yuan, with the CSI 300 Index losing 0.05% to 3777. Tokyo's Nikkei surrendered 0.6% to 17,400, and Hong Kong's Hang Seng shed 0.4% at 20,905.

The FTSE 100 in London increased 0.9% at 6640, and Frankfurt's Xetra DAX advanced 1.4% to 7607.