Bulls check out

NEW YORK (CNNMoney.com) -- The stock rally faded Friday afternoon as crude prices gained nearly $1 and trading thinned ahead of the weekend before July 4.

The 30-share Dow industrials (down 18.62 to 13,403.66, Charts), the broader S&P 500 (Charts) and the tech-heavy Nasdaq (Charts) all stood near even about three hours into the session. At one point the Dow was up over 100 points.

"I don't see anything fundamental here, we probably just lost a lot of market participants," said Art Hogan, chief market analyst at Jefferies and Co.

Hogan said trading volume on the New York Stock Exchange and the Nasdaq had slowed considerably in the last hour.

Todd Clark, director of stock trading at Nollenberger Capital Partners in San Francisco, said rising oil prices and continued inflation fears may be eroding the morning gains, but he also noted the upcoming holiday week and thin trading.

Oil prices rose amid a backdrop of falling U.S. gasoline and heating fuel stocks. U.S. crude for August delivery gained 78 cents to $70.35 a barrel on the New York Mercantile Exchange. Crude closed Thursday at its highest level since last August.

Earlier in the session stocks rallied on a combination of tame inflation numbers and moderate - but not too fast - economic growth.

A government report on consumer spending showed a key inflation reading rose just 0.1 percent in May, meeting forecasts of economists surveyed by Briefing.com.

That left the so-called core PCE, which measures consumer inflation excluding volatile food and energy prices, up 1.9 percent from a year earlier, just within the Fed's presumed comfort range of 1 to 2 percent.

In the report, personal spending and income both rose modestly last month, just below analysts' forecasts.

Separate reports showed construction spending jumped 0.9 percent last month, topping forecasts, while the revised University of Michigan consumer sentiment index for June also topped forecasts, though the reading was down from May.

But it was really the PCE number that mattered most.

"It adds credibility to the case that the Fed is on hold for the foreseeable future," said Jim Awad, chairman of Awad Asset Management in New York.

Fears over rising inflation and interest rates have recently stung stocks and pushed Treasury yields to a 5-year high, as higher interest rates make borrowing more expensive for companies and hurt profits.

The positive economic news kept investors' minds off the trouble in London. A stretch of road near Buckingham Palace was closed due to a suspicious vehicle hours after a bomb was found in another vehicle parked in a nearby entertainment district, police said.

London shares initially fell on the news, although exchanges ended higher across Europe.

U.S. stocks bounced around Thursday and finished little changed after the Federal Reserve left interest rates unchanged, as expected.

Bond prices rallied on Friday's tame inflation number, sending the yield on the benchmark 10-year Treasury note falling to 5.07 percent from 5.10 percent late Thursday. Bond prices and yields move in opposite direction.

Markets in Asia mostly advanced. The dollar was lower against the euro but higher versus the yen.

In corporate news, Apple (Charts, Fortune 500) is set to debut its iPhone in what is arguably the most hyped product launch in U.S. history. The iPhone, which can make calls, play music and browse the Internet, is due to go on sale nationwide at 6 p.m. local time. Shares of Apple rose about 1 percent in early trading Friday.

Research in Motion (Charts), which makes the popular BlackBerry device, reported a higher first-quarter profit that topped forecasts as it added more subscribers than expected and raised its earnings guidance. It also announced a three-for-one stock split, and its shares soared about 17 percent.

Palm (Charts) shares fell over 4 percent after it posted lower quarterly profit and weaker-than-expected revenue, even as it reported record sales of its Treo smart phones.

Market breadth was positive. On the New York Stock Exchange, winners beat losers 3 to 2 on volume of 646 million shares. On the Nasdaq, advancers and decliners were nearly even as 1.01 billion shares changed hands.