Stocks advanced yesterday, sending the Dow Jones Industrial Average to the highest level since December 2007, after a report from the Institute for Supply Management showed that U.S. manufacturing unexpectedly expanded in April at the fastest pace in 10 months.

The Dow climbed 0.5 percent to 13,279.32. JPMorgan Chase & Co., Intel Corp. and Alcoa Inc. advanced at least 1.8 percent to pace gains among the biggest companies.

Yields on 10-year Treasury notes rose from almost the lowest level in three months, climbing three basis points, or 0.03 percentage point, to 1.94 percent.

A Labor Department report on May 4 is likely to show employers added 161,000 jobs to payrolls in April and the unemployment rate stayed at 8.2 percent, according to the median forecasts in a Bloomberg survey of economists. In March, employers added 120,000 jobs, the fewest since October.

Growth Slows

Economic growth slowed to a 2.2 percent annual pace in the first quarter from 3 percent in the final three months of 2011, according to a Commerce Department report last week. While consumer spending increased by the most in more than a year, growth was restrained by a diminished contribution from business inventories and a drop in government spending.

Philadelphia Fed President Charles Plosser, who doesn't vote on policy this year, also warned of inflation risks yesterday, saying the central bank must be ready to contain accelerating prices.

"With the very accommodative stance of monetary policy that has now been in place for more than three years, we must guard against the medium- and longer-term risks of inflation," Plosser said in San Diego. He repeated that the Fed may have to raise interest rates "well before" the end of 2014 "in the absence of some shock that derails the recovery."

Atlanta's Dennis Lockhart, another voting member of the FOMC, repeated that he's skeptical of the benefits of further bond purchases. The Fed bought $2.3 trillion of assets in two rounds after cutting its benchmark rate close to zero in December 2008.

Not all Fed officials are in agreement that the central bank should only maintain its current policy stance.

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