NEW YORK (AP) _ Stocks rose modestly Friday after a government report confirmed that personal spending came in at its weakest level in 17 months in February and after a profit warning from J.C. Penney Co. weighed on retail stocks.

The Commerce Department's report showed consumer spending ticked up by a slight 0.1 percent last month, in line with Wall Street's expectations. But word that personal incomes advanced by 0.5 percent in February came as a surprise after the market was looking for a 0.3 percent rise.

Investors appeared somewhat cheered after the findings also showed that an important inflation gauge tied to consumer spending rose only 0.1 percent when excluding often-volatile energy and food costs. The reading the Federal Reserve's preferred measure of inflation is up 2 percent over the past 12 months. With so-called core inflation back within the Fed's target of 1 percent to 2 percent it could be easier for the central bank to justify further interest rate cuts without fear of adding too much money to the economy and driving up prices.

But the profit warning from J.C. Penney offered renewed room for concern about the well-being of consumers and hurt retail stocks. As Wall Street tries to determine the degree to which the economy is slowing, any news that consumers are less willing to reach into their wallets is unwelcome. That's because consumer spending accounts for about 70 percent of U.S. economic activity.

"I'm viewing a day like today as sort of a continuation from where we were a month or two ago," said Les Satlow, portfolio manager at Cabot Money Management in Salem, Mass. "The U.S. recession concerns have resurfaced. They never went away but there was the beginning of the sense that this recession was going to be shallow and maybe a bit benign.

"I do think we've got a couple more quarters of range-bound activity in the markets," he said.

In midday trading, the Dow Jones industrial average rose 12.29, or 0.10 percent, to 12,314.75.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 1.81, or 0.14 percent, to 1,327.57, and the Nasdaq composite index rose 6.93, or 0.30 percent, to 2,287.76.

The moves comes after a two-day decline. The Dow fell 120 points Thursday as investors found little reason to continue a big rally that started the week; a government report on the gross domestic product confirmed a big economic slowdown in the fourth quarter.

Bond prices rose Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.50 percent from 3.52 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell $1.74 to $105.84 on the New York Mercantile Exchange.

In corporate news, J.C. Penney predicted a first-quarter profit of 50 cents per share, down from an earlier target of 75 cents to 80 cents. The stock fell $2.70, or 6.7 percent, to $37.82.

Kohl's Corp. fell $2.04, or 5 percent, to $42.48 and Macy's Inc. slid 79 cents, or 3.4 percent, to $22.57. Higher-end retailers lost ground as well. Nordstrom Inc. declined $1.63, or 4.7 percent, to $32.96, while Tiffany & Co. slid $1.45, or 3.3 percent, to $41.70.

A Citi Investment Research analyst raised his rating on Lehman Brothers Holdings Inc. to "Buy" from "Hold," pointing in part to the stock's "extremely attractive" price. Lehman rose 4 cents to $38.75.

Advancing issues narrowly outpaced decliners on the New York Stock Exchange, where volume came to 530.2 million shares.

The Russell 2000 index of smaller companies rose 0.05, or 0.01 percent, to 69.24.

Overseas, Japan's Nikkei stock average rose 1.71 percent. In afternoon trading, Britain's FTSE 100 fell 0.55 percent, Germany's DAX index fell 0.25 percent, and France's CAC-40 declined 0.52 percent.

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Copyright 2008 The Associated Press.