NEW YORK—The U.S. stock market closed higher last Friday to cap a strong April, sending the blue-chip Dow Jones Industrial Average to its highest level in nearly three years.

Propelled by strong corporate earnings led by heavy equipment maker Caterpillar Inc., the Dow Jones Industrial Average rose 47.23 points to close at 12,810.5 points. The S&P 500 gained 3 points, or 0.23 percent, while the Nasdaq Composite Index climbed 1 point, or 0.04 percent.

The Dow’s finish sends the index to its highest point since May 20, 2008, prior to the financial system crash, which saw Lehman Brothers collapse and American International Group’s bailout.

The index’s 4 percent monthly gain was the biggest monthly growth since December 2010. Both the S&P and the Nasdaq saw their best months since February 2011.

The Dow was helped by Caterpillar, which reported a record high quarterly profit of $1.2 billion, a 411 percent increase from the same period last year. First-quarter earnings per share came in at $1.84—both figures were record highs for a quarter for the company.

Caterpillar’s stock soared 2.5 percent last Friday, pacing the Dow, and the company also increased its revenue and earnings targets for 2011 on strong demand from emerging markets.

“We increased production, cost control was excellent, and our operating profit margin improved,” announced Doug Oberhelman, Caterpillar’s CEO in a statement. “Our new organization is in place, is focused on execution, and is getting the job done.”

Analysts believe part of the reason for Caterpillar’s success has been surging commodity prices, leading to more raw material and mineral exploration by mining and drilling companies. An improved global economy has also spurred new construction projects.

Bullish Sentiments

The Dow has increased by more than 10 percent since Jan. 1, rising steadily month over month, as investors continue to shrug off the U.S. debt debate and rising oil and gas prices.

Investors have mainly been encouraged by first-quarter corporate earnings showing that businesses are on a spending spree and consumer confidence remains bullish.

“With about half of the reports out, earnings have been better than preseason expectations. Contrary to expectations, growth rates and positive surprises have generally been in line with the preceding quarters,” said Sheraz Mian, an analyst at Zacks. “Importantly, concerns about margin squeeze and the impact of Japan have not materialized, at least not yet.

Small Caps at All-Time Highs

Overlooked in the recent stock market surge has been the performance of small caps, namely the most-watched small cap index, the Russell 2000, which tracks the performance of small- to medium-sized publicly traded companies.

Russell 2000 last Friday briefly touched all-time highs, a sign that smaller companies are growing faster and more robustly than their biggest counterparts, which is expected following a recession.

The index closed 3.7 points higher to 865.29. “As long as we stay above the 850 level, the Russell remains in primary uptrend/bullish mode with no remaining overhead levels of resistance to monitor,” wrote analyst Corey Rosenbloom from ETF News.

Consumer Confidence Rises

Consumer confidence, a measurement of consumer spending patterns, rose in April to 65.4, according to the Conference Board’s Consumer Confidence Index.

“Consumers’ short-term outlook improved slightly, suggesting that the uncertainty expressed last month is easing,” said Lynn Franco, director of The Conference Board Consumer Research Center in a statement.

Consumer outlook was buoyed by a sixth straight month of payroll gains and lower unemployment rate. Consumer spending makes up more than 70 percent of the United States GDP.

Goodyear, Coinstar Gains

The Goodyear Tire & Rubber Co. reported a first-quarter profit on higher sales, the company said last week. Goodyear announced profits of $103 million, or 42 cents per share, on a 27 percent increase in revenues. Both figures were above analyst expectations.

The company said that higher demand and higher prices mostly offset rising raw material prices such as rubber and oil.

Kiosk operator Coinstar’s shares also gained last Friday as the company reported strong fiscal second quarter earnings. The Bellevue, Wash.-based company operates the RedBox movie kiosks at grocery stores and pharmacies, and analysts say that it could benefit from strong consumer demand if Dish Network, the new owner of Blockbuster, chooses to close more Blockbuster stores.

Stocks End April at Three-Year Highs