NEW YORK (AP) – Stocks were mostly higher Friday as investors traded optimistically ahead of next week’s rush of earnings releases after a government report on wholesale inflation eased some fears of higher interest rates.

The Dow Jones industrials advanced, but the technology-dominated Nasdaq composite index slipped, pressured by signs of weakness among chip makers.

Investors were overall encouraged by the Labor Department’s report that its Producer Price Index was flat in March after stripping out the more volatile prices for energy and food. Including energy and food, wholesale prices rose 1 percent, a smaller rise than the 1.3 percent jump in February.

The stock market’s gains were limited slightly by the University of Michigan’s consumer sentiment index, which weakened in early April and raised worries that consumers could rein in spending. Investors are also anxious that the Federal Reserve will raise interest rates to contain inflation, and that economic growth is being stymied by the slumping housing market, rising energy prices and other factors.

“Inflation is a little higher than investors would want, and the economy is a little weaker,” said Michael Strauss, chief economist at CommonFund. “The equity market is put in a difficult position. The Fed might lower interest rates, but until we get closer to the easing process, stocks will see more gyrations up and down.”

However, investors ultimately decided to buy into the stock market ahead of next week’s spate of first-quarter financial results, which they are anticipating will show slow corporate growth.

In midafternoon trading, the Dow rose 39.34, or 0.31 percent, at 12,592.30, extending its advance after gaining in nine of the last 10 sessions.

The blue chip index was helped Friday by news from Merck & Co., which rose $4.04, or 8.7 percent, to $50.40. The drugmaker soared after a federal judge in New Jersey dismissed a lawsuit related to its discontinued arthritis pain reliever Vioxx, and after the company raised its profit outlook for 2007.

The broader Standard & Poor’s 500 index gained 2.48, or 0.17 percent, at 1,450.28, while the Nasdaq fell 1.95, or 0.08 percent, to 2,478.37.

Technology stocks slipped when Samsung Electronics Co., the world’s largest memory chip maker, said its profit declined for a second straight quarter amid falling computer chip prices. Also weighing on the tech sector, Apple Inc. said it would delay the release of Leopard, the next upgrade of its Mac operating system, until October. Apple fell $1.95, or 2 percent, to $90.23.

Bonds fell after the consumer sentiment data, with the yield on the benchmark 10-year Treasury note rising to 4.76 percent from 4.74 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.

A report from the Commerce Department that the American trade deficit improved for a second straight month gave some support to stocks.

But inflation concerns remain high, due to rising oil prices. On Friday, crude extended its rally as the International Energy Agency reported that world oil output declined in March. A barrel of light sweet crude rose 6 cents to $63.91 on the New York Mercantile Exchange.

One of the few Dow components to release its earnings before next week’s rush, General Electric Co., rose 27 cents to $35.45 after it posted first-quarter results that matched Wall Street projections. However, the conglomerate said profit in one of its businesses was “tempered” by its U.S. mortgage business because of subprime loans.

Analysts are predicting that the next few weeks will show that American companies are still posting profit overall, but that growth will be cooler than in past years.

“The U.S. economy is weak, and margins have compressed a bit,” said Brian Gendreau, investment strategist for ING Investment Management. “Earnings cannot continue at a double-digit rate forever.”

But he added that so far, earnings have been coming in better than expected. A big reason, he said, is that nearly half of revenue from the 30 Dow components comes from foreign countries, and that growth was faster abroad in the first quarter than it was in America.

In other corporate news, SLM Corp., the biggest U.S. provider of student loans that is better known as Sallie Mae, is in talks with buyout firms and may be bought for more than $20 billion, according to a report in The New York Times. Its stock soared $5.30, or 13 percent, at $46.06.

Also keeping enthusiasm about takeover activity afloat, Morgan Stanley bought 13 hotels from Japanese carrier All Nippon Airways Co. for about $2.4 billion. The deal roughly doubles the investment bank’s portfolio of hotels in Japan. However, Morgan Stanley fell 16 cents to $79.91.

Advancing issues outnumbered decliners by about 6 to 5 on the New York Stock Exchange, where volume came to 919.5 million shares.

The Russell 2000 index of smaller companies rose 0.09, or 0.01 percent, at 815.14.

Overseas, Japan’s Nikkei stock average closed down 1.01 percent. Britain’s FTSE 100 was up 0.72 percent, Germany’s DAX index added 0.97 percent, and France’s CAC-40 was rose 0.70 percent.

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