NEW YORK - The Dow Jones industrial average tacked on a modest 31 points yesterday after being up as much as 139, and the Standard & Poor's 500 index edged up to reach its highest level since November.

Investors welcomed a drop in jobless claims, growth in retail sales, and better-than-expected demand at a government debt auction. But traders also seemed mindful of how far the market has come in its three-month rally.

Doug Lockwood, chief investment officer at Cornerstone Wealth Management, said the improvement in sales was a strong signal of an easing recession. Hope of a recovery has pushed the S&P 500 index up 39.7 percent from a 12-year low reached March 9.

"There has been a lot of rallying and rebounding going on, but we have to continue to see improvements," Lockwood said.

Stocks rose to their highest levels of the day when the Treasury Department said an auction for 30-year Treasury bonds drew strong demand.

The Dow rose 31.90, or 0.37 percent, to 8,770.92. The S&P 500 rose 5.74, or 0.61 percent, to 944.89, just above its close on June 2 and its highest point since Nov. 5. The Nasdaq composite index rose 9.29, or 0.50 percent, to 1,862.37, its best level since Oct. 6.

Investors have been uneasy in the last two months about demand for government debt. If Washington has to raise rates to attract buyers, that could hurt the economy by boosting borrowing costs.

The Mortgage Bankers Association said this week that demand for refinancing mortgages had fallen as rates moved higher. Like consumer spending, a recovery in the housing market is seen vital to an economic recovery.

Bond investors have also been worried that a flood of new supply in the Treasury market could hurt Treasury prices as the government issues massive amounts of debt to finance its financial-bailout and economic-stimulus programs.

A weakening dollar, which can drive up prices of imported goods and commodities, has also brought worries of inflation. The dollar fell against other major currencies, while gold prices rose. Oil rose $1.35 to settle at $72.68 a barrel after hitting an eight-month high.

Oil has been rising, in part, as more investors worried about the slide in the dollar have looked for a place to stash money.

The Russell 2000 index of smaller companies rose 2.37, or 0.45 percent, to 526.08.