US STOCKS-Dow posts best month in 2011 but Microsoft drags

                                

  * Caterpillar leads industrials higher on results, outlook
  * Microsoft falls on earnings, RIM tumbles after outlook
  * Nasdaq posts eighth straight day of gains
  * Dow up 0.4 pct, S&P up 0.2 pct, Nasdaq up 0.04 pct
                                
 * For up-to-the-minute market news see STXNEWS/US
 (Updates to close)
                                
 By Chuck Mikolajczak
                                
 NEW YORK, April 29 (Reuters) - U.S. stocks rose on Friday
on strength from Caterpillar and other industrials, lifting
the Dow and Nasdaq to their best monthly performance since
December.
                                
 Heavy machinery manufacturer Caterpillar Inc <CAT.N> led
the way after reporting a fivefold increase in profit and
raising its full-year forecast. For details see
[ID:nN29109180]
                                
 "Now that earnings are coming in, the investment community
is telling you that once some of these negative issues subside
-- sovereign debt, Middle Eastern tensions -- this market is
going to rip," said Jason Weisberg, managing director at
Seaport Securities Corp.
                                
 The blue-chip Dow average climbed 4 percent for the month
while the S&P 500 rose 2.8 percent and the Nasdaq gained 3.3
percent.
                                
 "You take that entire mixture and the market took all of
that simultaneously -- they weren't separate events -- they
were all concurrent. And we couldn't blast the market below
12,000," Weisberg said.
                                
 Concerns that the market would pull back after earnings
are somewhat offset by favorable corporate outlooks and
expectations for continued easy money policies from the
Federal Reserve that have fueled runs in speculative assets.
                                
 April's gains were limited by slides in Microsoft Corp
<MSFT.O>, the Nasdaq's most heavily traded stock, and
BlackBerry maker Research in Motion <RIM.TO><RIMM.O>.
                                
 Caterpillar gave the top boost to the Dow, advancing 2.5
percent to $115.41, after reaching an all-time high of $116.25
during the session. The S&P industrial sector index <.GSPI>
added 0.3 percent. Caterpillar is up more than 20 percent so
far this year, along with fellow industrial Boeing Co <BA.N>.
                                
 Microsoft dropped 3 percent to $25.92 and was the biggest
drag on the blue-chip Dow after it reported a drop in
quarterly sales of its Windows software, mirroring a recent
downturn in demand for personal computers. U.S.-listed shares
of Research in Motion tumbled 14 percent to $48.65 after the
BlackBerry maker cut its first-quarter forecasts.
[ID:nN28287884] [ID:nN28282063]
                                
 The Dow Jones industrial average <.DJI> gained 47.23
points, or 0.37 percent, to 12,810.54. The Standard & Poor's
500 Index <.SPX> rose 3.13 points, or 0.23 percent, to
1,363.61. The Nasdaq Composite Index <.IXIC> edged up 1.01
points, or 0.04 percent, to 2,873.54.
                                
 For the week, the Dow rose 2.4 percent, the S&P 500 gained
2 percent and the Nasdaq advanced 1.9 percent.
                                
 Merck & Co Inc <MRK.N> reported higher-than-expected
quarterly earnings, fueled by strong sales of drugs for
diabetes, asthma and rheumatoid arthritis, while Chevron Corp
<CVX.N> reported a jump in earnings as oil prices surged.
                                
 Shares of Merck rose 0.45 percent to $35.95 while Chevron
added 0.6 percent to $109.44. Both stocks are Dow components.
[ID:nN29113830] [ID:nN29188488]
                                
 Robust corporate earnings, ample liquidity from the
Federal Reserve and the prospect of ultra-low interest rates
for the rest of the year have sparked bullishness, pushing the
Nasdaq to a 10-year high and lifting the S&P 500 more than 8
percent this year. The major U.S. stock indexes also hit new
yearly highs during the week.
                                
 The rebalancing by Nasdaq OMX <NDAQ.O> of its benchmark
Nasdaq 100 index <.NDX> will take place on May 2, in which the
exchange said it will cut the weight of 82 securities to bring
them more in line with their market capitalizations. Apple Inc
<AAPL.O> will see its weighting dropped to 12.3 percent from
20.3 percent. [ID:nN05115132]
                                
 With May, the market is heading into a typically weak
period. May has been the fourth-weakest month for the Dow,
averaging a 0.2 percent gain since 1950, according to the
Stock Trader's Almanac. It also normally marks the start of
the worst six months of the year for the industrials.
                                
 Volume was light, with about 7.17 billion shares traded on
the New York Stock Exchange, NYSE Amex and Nasdaq, below the
daily average of 7.72 billion.
                                
 Advancing stocks outnumbered declining ones on the NYSE by
1,953 to 1,028, while on the Nasdaq, advancers beat decliners
1,417 to 1,146.
 (Reporting by Chuck Mikolajczak; Editing by Jan Paschal)