NEW YORK — U.S. stocks jumped and bonds edged higher Monday, with the Dow Jones industrial average scoring its highest close in more than three months, on optimism that the Federal Reserve is done with raising interest rates for now.

The yen fell broadly, dipping to two-week lows against the dollar, amid concerns about Japan's economy after last week's interest-rate hike.

Crude oil futures rallied to their highest levels in almost a month amid frenzied buying late in the session, while coffee tumbled to six-year lows on all-round selling.

The Dow Jones industrial average climbed 148.34 points, or 1.35 percent, to close at 11,176.14, based on the latest numbers. This marked the Dow's highest finish since April 11.

On Friday, the Dow pierced the psychologically key 11,000 level for the first time in 3-1/2 months.

Money flowed into shares of interest-rate-sensitive financial services companies and retailers, giving the market a surge of energy.

"People are convinced that we're not going to have a rate hike, and that alone is enough to promote positive psychological buying patterns in the market,'' said Barry Hyman, market strategist for Ehrenkrantz, King, Nussbaum.

The Federal Reserve meets Aug. 22 to decide the fate of U.S. interest rates. The central bank has tightened monetary policy six times last June, and Wall Street had begun to worry more hikes would bite into corporate profits.

Technology shares also heated up, caught in the backdraft as semiconductor shares made a blazing rebound from recent declines.

The technology-stacked Nasdaq Composite Index, meanwhile, rose 60.22 points, or 1.59 percent, to 3,849.69, while the broader Standard & Poor's 500 Index climbed 19.72 points, or 1.34 percent, to 1,491.56.

But the market's rally was tempered by modest trading volumes, with many Wall Streeters taking summer vacations, traders said.

"It's difficult to get a great deal of excitement about the marketplace when a lot of the players are on the beach,'' said Arthur Hogan, chief market analyst at Jefferies & Co.

J.P. Morgan & Co. Inc. was leading the Dow higher, rallying 4-1/16 to 147-15/16, as investors guessed the coast was clear in terms of the Fed and scooped up shares of banks and brokerages.

Hewlett-Packard Co. also bolstered the Dow, plowing 3-15/16 higher to 113-15/16. The personal computer giant is set to report its earnings on Wednesday.

On the Nasdaq, Dell Computer Corp. was the technology-heavy gauge's most active stock, falling 1 to 36-11/16 after analysts forecast a less robust second half for the world's No. 2 personal computer maker.

But computer chip makers gave the Nasdaq a jolt, and the Philadelphia Stock Exchange's semiconductor index blasted 7.71 percent higher. The sector had suffered recently amid fears of a cyclical slowdown. Semiconductor giant Intel Corp. rose 3-1/8 to 66-15/16.

Analysts said data on U.S. consumer prices scheduled for release on Wednesday was expected to do little to shake Wall Street's confidence that the Fed's cycle of higher interest rates is drawing to a close.

"The consensus is that the Fed will not do anything, and as a result, people are trying to position themselves ahead of that news,'' said George Rodriguez, senior vice president at Guzman & Co.

"I expect the market to get stronger in anticipation that things will stay status quo,'' Rodriguez added.

Monday's economic news was mostly encouraging. U.S. business inventories piled up at a stronger-than-expected 0.9 percent in June. Economists had forecast a gain of 0.5 percent.

A rise in inventories can indicate either a weakening in demand, which could mean that goods are accumulating on producers' shelves, or stockpiling by businesses in anticipation of more vigorous sales.

The benchmark 30-year U.S. Treasury bond rose 7/32, or $2.1875 on each $1,000 of face value. The yield, which moves in the opposite direction, fell to 5.69 percent from 5.71 percent at Friday's close. The 10-year Treasury note gained 4/32 to yield 5.78 percent, down from 5.79 percent.

The euro settled at 90.52 cents, up from 90.22 cents late Friday. The dollar rose to 109.44 yen on Monday from 108.49 yen on Friday.

At the New York Mercantile Exchange, crude oil futures peaked at $32 a barrel, buoyed by late buying. Heating oil and gasoline futures also climbed ahead of the release of closely watched industry inventory data on Tuesday after the end of regular trading. September delivery crude oil settled at $31.94, rising 92 cents from Friday's close. September heating oil futures settled at 87.34 cents a gallon, up 1.52 cents.

Late buying of gasoline futures pushed the September delivery contract to the day's peak of 92.30 cents a gallon before settling at 92.02 cents, up 0.83 of a cent.

On the Coffee, Sugar & Cocoa Exchange, which is part of the New York Board of Trade, coffee futures settled Monday at six-year lows. The price drop reflected the market's reaction to mild weather in Brazil, the world's No. 1 coffee producer, and expectations of data showing an increase in coffee stockpiles. September delivery coffee fell 1.85 cents to end at 78.80 cents a pound, after hitting a new lifetime low of 76.50 cents a pound.

Overseas, London's FTSE-100 index closed at 6,419.9, up 35.4 points, or 0.55 percent. In Tokyo, the benchmark Nikkei average rose 36.41 points, or 0.23 percent, to finish at 16,153.91.