The Commerce Department said early Friday that both personal income and spending rose 0.4 percent in April, in line with what economists expected. However higher food and gas prices accounted for most of the spending increase.
Americans got an increase in their take-home pay this year as a result of a cut in taxes withheld from their paychecks for Social Security. Some of that tax benefit has been eaten up by higher gas prices.
Prices for gas have come down in May after hitting nearly $4 in April, giving a lift to a measure of consumer confidence that is closely watched by investors.
The Thomson Reuters/University of Michigan Consumer Sentiment index jumped to 74.3 in May, above analysts' estimates of 70. The index slumped to 69.8 in April due largely to concerns about higher gas prices and inflation.
"That's what a 25-cent drop in gas prices will do," said David Ader, bond strategist at CRT Capital Group in an email to clients.
Marvell Technology Group Ltd. jumped 10 percent in early trading. The maker of chips for data-storage and Blackberry's smartphones reported a slight drop in earnings. But Marvell's CEO forecast higher sales in the current quarter.
CVS Caremark Corp. rose 2 percent after the pharmacy benefits company won a three-year contract from the Blue Cross Blue Shield Federal Employee Program.
The Dow Jones industrial average rose 21 points, or 0.2 percent, to 12,423. The Standard & Poor's 500 index rose 3 points, or 0.2 percent, to 1,328. The Nasdaq composite rose 6 points, or 0.2 percent, to 2,789.
Strong earnings and a plea to push Microsoft's CEO aside helped push stocks higher Thursday for the second day running.
All three indexes remain down for the week, after dropping the previous two weeks in a row. Stock markets took a hard fall Monday with a batch of bad news from Europe. Another downgrade of Greece's weak credit rating, a warning on Italy's debt and a major defeat of Spain's ruling party over the weekend deepened worries about Europe's debt crisis.
Stocks hit their highest levels of the year April 29 following a strong run of corporate earnings. The S&P 500 has fallen 2.4 percent since then as Greece struggles to avoid default and U.S. economic forecasts were revised lower, partly due to high gas prices.
Trading is expected to be light before the long weekend. Markets are closed Monday for Memorial Day.