Judging by the stock market, you'd think the U.S. economy was back in party mode.
Stocks pushed back Friday toward levels they last saw long before the financial crisis. The Dow Jones industrial average, which has fallen only three days this month, was up 13 points in the afternoon.
Telecommunications and health care stocks rose the most. Apple, on the day customers lined up around the world to buy its iPhone 5, reached an all-time high of $705.07 before falling back to $702.
The Dow had a shot at closing above 13,600 for the first time since Dec. 10, 2007, nine months before the fall of Lehman Brothers investment bank. It has risen more than 1,200 points since the start of June.
The summer rally doesn't mean the underlying economy is healed _ far from it. It's mostly the result of vows by the Federal Reserve and other central banks to help more.
"It's just a big illusion," said Bob Phillips, managing partner at Spectrum Management Group in Indianapolis. The economy, he said, is still a "no man's land" plagued by high unemployment and slow growth.
The signs were obvious Friday: The Labor Department reported that the unemployment rate rose in 26 states last month. The World Trade Organization cut its estimates for growth in global trade for this year and next.
In Europe, Spain was reportedly close to asking for a bailout from Europe. The finance minister of Germany, which has paid for much of the previous bailouts, shot back that Spain doesn't need it.
But by mid-afternoon, the Dow Jones industrial average was up 13 points to 13,610. The Standard & Poor's 500 was up two to 1,462, also flirting with its highest close since December 2007. The Nasdaq composite index was up seven to 3,183.
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Credit the Fed and other central banks. This week, the Bank of Japan agreed to buy more Japanese government bonds to jump-start the economy there. That followed similar announcements from the Fed last week and the European Central Bank before that.
Those announcements don't mean the economy is improving. In fact, they mean quite the opposite: The central banks think the economy is bad enough that it can't heal on its own.
But there's only so much the Fed can do. It can't fix the fiscal cliff, the higher taxes and government spending cuts that take effect next year until Congress acts, and could throw the economy back into recession.
Timothy Leach, wealth management chief investment officer for U.S. Bank in San Francisco, said central banks are buying time more than fixing underlying problems.
"But at least they're taking some of the pressure off," Leach added, "allowing policymakers some additional time to try to achieve those real solutions."
Among stocks making big moves:
_ Homebuilder KB Home swung to a quarterly profit by selling pricier homes. KB Home's stock jumped $2.39, or more than 18 percent, to $15.50.
_ Darden Restaurants, parent of Olive Garden and Red Lobster, reported a higher quarterly profit. The stock rose $2.34, or more than 4 percent, to $57.06. (AP New York)
By CHRISTINA REXRODE
AP Business Writer