By Anastasija Johnson

NEW YORK (Reuters) - U.S. blue-chip stocks rose on Friday, sending the Dow to a record for a second straight day, and the dollar recovered from lows against the euro after a stronger-than-expected U.S. consumer sentiment report tempered worries about the economy's health.

The boost in the Reuters/University of Michigan July consumer confidence survey offset an earlier report that showed retail sales suffered their biggest monthly drop in nearly two years in June as the housing market slump took its toll on consumers.

The retail sales data initially pressured the greenback and lifted U.S. Treasuries, but the trend changed with the consumer confidence data.

The consumer sentiment number "was a little better than expected. So the argument the consumer is being impacted by higher gasoline prices, by housing, by subprime -- we're not seeing evidence," said Mark Bronzo, managing director at Gartmore Separate Accounts, in Irvington, New York.

The Dow Jones industrial average crossed 13,900 for the first time and reached yet another lifetime high at 13,910.26. It was up 30.56 points, or 0.22 percent, at 13,892.29.

The Standard & Poor's 500 Index came within a couple of points of its all-time high of 1,553.11 set in March 2000. It was was up 1.77 points, or 0.11 percent, at 1,549.47. But The Nasdaq Composite Index was down 3.05 points, or 0.11 percent, at 2,698.68.

In addition to the consumer sentiment data, U.S. blue-chip stocks were supported by General Electric Co's announcement of an expanded share repurchase plan.

Shares of GE, the world's second-largest company by market capitalization, rose 2.62 percent, putting the stock among the Dow industrial average's biggest advancers, along with shares of Alcoa Inc. and Caterpillar Inc..

U.S. equities reflected buoyant sentiment in Europe and Asia amid calming of fears over possible spillover effects from the U.S. subprime mortgage market, which caters to borrowers with poor credit histories.

The FTSEurofirst 300 index of leading European shares rose 0.38 percent to 1.627.4 points, after earlier hitting 1,635.6 points, its highest level since November 2000.

Germany's DAX index hit an all-time high above 8,150 points, while Britain's FTSE 100 rose 0.3 percent, and France's CAC 40 gained 0.3 percent. And Japan's Nikkei average climbed 1.42 percent on Friday.

DOLLAR FIRMS, YEN PRESSURED

The dollar recovered from record lows against the euro to trade steady on Friday after the Reuters/University of Michigan consumer sentiment index hit a six-month high in July on rallying stocks. Still, sentiment remained bearish given lingering problems in the U.S. credit and housing sectors.

The dollar was up against a basket of major trading-partner currencies, with the U.S. Dollar Index up 0.03 percent at 80.615 from a previous session close of 80.592.

The euro was down 0.08 percent at $1.3781 from a previous session close of $1.3792. Against the Japanese yen, the dollar was down 0.16 percent at 122.17 from a previous session close of 122.36.

But the yen hit a record low versus the euro, weighed down by the continuing view that Japanese interest rates will stay ultra low for some time, which maintained the Japanese currency's status as a cheap source of borrowing intact.

U.S. Treasuries gave up early gains.

"The equity market strength here is just distracting (from) the demand for Treasuries," said Matthew Moore, economic strategist with Banc of America Securities in New York.

The benchmark 10-year U.S. Treasury note was up 5/32 in price, with the yield at 5.1264 percent. The 2-year U.S. Treasury note was down 1/32, with the yield at 4.95 percent. The 30-year U.S. Treasury bond was up 6/32, with the yield at 5.2123 percent.

In energy and commodities prices, U.S. light sweet crude oil rose 96 cents, or 1.32 percent, to $73.46 per barrel, and spot gold prices fell $1.40, or 0.21 percent, to $665.60. The Reuters/Jefferies CRB Index was up 1.11 points, or 0.34 percent, at 324.07.