Updated from 4:10 p.m. EST

The Dow Jones Industrial Average and the S&P 500 closed Wednesday at their best levels in nearly five years as the Federal Reserve's latest beige book report helped traders overcome worries about rising rates.

The Dow gained 58.43 points, or 0.52%, to 11,209.77, and the S&P 500 rose 5.54 points, or 0.43%, to 1303.02. Both had their highest finishes since May 2001. The Nasdaq Composite added 15.94 points, or 0.69%, to 2311.84.

The 10-year Treasury bond was down 10/32 in price to yield 4.73%, while the dollar fell against the yen and euro.

The market moved higher after the beige book showed that the economy continued to expand in January and February as labor-cost pressures were little changed. Most districts reported a pickup in input prices, which are generally related to elevated energy costs. In addition, some districts noticed a slowing of residential real estate activity.

"The beige book was the spark that got the market going," said Michael Sheldon, chief market strategist with Spencer Clarke. "It turned what was previously a mixed market into a bullish one. The majority of stocks posted gains."

The Dow benefited from DuPont ( DD), which raised its first-quarter earnings guidance. The chemical company now expects to earn 80 cents a share in the quarter, up from the 70 cents it predicted in January. DuPont also said it will cut 1,500 jobs in its performance-coatings business, closing facilities in Spain, Germany and the Netherlands. DuPont gained 95 cents, or 2.3%, to close at $42.87.

Tech stocks gained despite losses in Apple ( AAPL) and Google ( GOOG), both closing lower by more than 1.6%.

"Both Apple and Google, which are typically bull market leaders, lost almost 2%," said Sheldon. "This may signal a shift of leadership from past technology leaders to other economically sensitive areas of the market."

To view Kara Wetzel's video take on today's market, click here .

About 1.63 billion shares traded on the New York Stock Exchange, with advancers beating decliners by a 2-to-1 margin. Trading volume on the Nasdaq was 2.13 billion shares, and three stocks rose for every two that fell.

Oil eased, with April crude losing 93 cents to close at $62.17 a barrel. The decline came after an Energy Department report showed that U.S. crude inventories rose by 4.8 million barrels last week, nearly doubling expectations. Gasoline stocks fell by 800,000 barrels, while distillate inventories dropped by 3.9 million barrels.

By sector, the Amex Oil index finished up 0.7%, and the Philadelphia Semiconductor Sector index rose 0.3%. The Amex Airline index extended Tuesday's gains, adding 1.9%.

The Labor Department said import prices fell 0.5% in February, while export prices were unchanged for the month. The larger-than-expected decline in import prices was attributed to lower natural gas and petroleum prices.

The New York Federal Reserve Bank said its Empire State Manufacturing index rose to a reading of 31.2 in March from a revised 21.0 in February. Economists anticipated the index would dip to a reading of 18.5.

"The huge strength of the headline is reflected in most of the subindexes," said Ian Shepherdson, chief economist with High Frequency Economics. "Provided this is not some sort of fluke, the survey points to a hefty rise in the national ISM."

Also on the economic docket, the Treasury Department said international capital inflows to the U.S. were $66 billion in January, up from $56 billion in December. The report showed foreign purchases of U.S. securities failed to finance the U.S. current-account deficit for the second-straight month.

A day after Goldman Sachs' ( GS) blowout first quarter helped drive a stock market rally, Lehman Brothers ( LEH) announced a slightly less spectacular earnings beat.

Lehman earned $1.08 billion, or $3.66 a share, in the first quarter, up from $875 million, or $2.91 a share, a year ago. The latest results included a 16 cents-a-share gain, related to accounting changes. Lehman was expected to say that profit rose 9% to $3.17 a share, according to First Call. Lehman lost $1.15, or 0.8%, to $144.15.

Meanwhile, Morgan Stanley raised its price target for Goldman to $165, while UBS went to $163. Goldman fell 42 cents, or 0.28%, to $149.

A group led by buyout specialist Kohlberg Kravis & Roberts has offered up to $13 billion for General Motors' ( GM) finance arm, The Wall Street Journal reported. The bid for GMAC follows a competing offer for the unit by a hedge fund group that includes Cerberus Capital. Shares of GM were higher by 36 cents, or 1.7%, to $21.50.

Sears ( SHLD) said fourth-quarter earnings more than doubled to $648 million, or $4.03 a share, easily beating estimates. Revenue was $16.09 billion. Sears jumped $15.02, or 12.8%, to close at $132.29.

Shares of Microsoft ( MSFT) were trading higher after RBC Capital Markets started coverage of the company with an outperform rating. Microsoft rose 13 cents, or 0.48%, to $27.36.

Overseas markets were higher, with London's FTSE 100 up 0.2% to 5965 and Germany's Xetra DAX adding 0.5% to 5898. In Asia, Japan's Nikkei rose 0.5% overnight to 16,319, while Hong Kong's Hang Seng gained 1.3% to 15,720.

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