Dow Jones: 12,233.15 (+71.52) SP 500: 1,324.57 (+5.52) Nasdaq: 2,797.05 (+13.06)

THE DOW notched a seventh straight day of gains yesterday, but light volume suggested that investors do not believe the more than five-month rally has the legs to keep going.

Surprisingly strong sales by McDonald’s boosted optimism on consumer spending and drove the Dow’s gains on what turned out to be the quietest day of trading so far in 2011.

Weakness in energy shares limited gains in the SP 500 and Nasdaq after China, the world’s second biggest energy consumer, raised interest rates for the second time in six weeks. The move pressured commodities on fears of lower demand but had little market impact outside that sector.

“The rate hike is important, but it isn’t at a critical level where it becomes troublesome,” said Michael Mullaney, a portfolio manager who helps manage $9.5 billion at Fiduciary Trust in Boston.

McDonald’s shares surged 2.6 per cent to $75.36 after its January same-store sales beat expectations, led by a rebound in European demand. The SP consumer discretionary index was up 1.2 per cent and was by far the top performer among SP sectors.

The Dow Jones industrial average was up 71.52 points, or 0.59 per cent, at 12,233.15.

The SP 500 Index was up 5.52 points, or 0.42 per cent, at 1,324.57. The Nasdaq Composite Index was up 13.06 points, or 0.47 per cent, at 2,797.05.

In extended trading, Dow component Walt Disney gained 2.8 per cent after it reported higher first-quarter earnings.

The SP energy sector was by far the weakest SP sector, down 0.5 per cent. US crude for March delivery settled down 0.6 per cent.

Merger activity continued for a second straight day with Kindred Healthcare’s planned acquisition of RehabCare to create a post-acute healthcare services company. Kindred Healthcare jumped 28.3 per cent to $25.00, and RehabCare soared 45.5 per cent to $37.05.

On the downside, US-listed shares of generic drug-maker Teva Pharmaceutical Industries fell 5.4 per cent to $52.02 after it reported results that fell short of forecasts.

Avon Products posted a steeper-than-expected drop in quarterly profit. Shares of the cosmetics company fell 3 per cent to $28.47. – (Reuters)