Washington ? The economy throttled back in the second quarter as consumers and companies turned cautious amid surging energy prices. Wall Street rallied on the hope that a break in two years of interest-rate pain may be in sight.

The nation’s gross domestic product advanced at an annual rate of just 2.5 percent in the April-to-June period, less than half the pace of the previous three months, according to Friday’s economic snapshot released by the Commerce Department.

The first quarter’s lively 5.6 percent growth rate – the fastest in 2 1/2 years – reflected energetic spending and investment by people and businesses alike.

But in the second quarter, Americans felt the pinch of $3-a-gallon gasoline prices and higher interest rates.

“This expansion is getting a little frayed around the edges because of consumer exhaustion,” said Ken Mayland, economist for ClearView Economics. “Consumers are losing that extra mojo to spend” now that the slowing housing market is making people feel less wealthy, he said.

Still, stocks shot up. The Dow Jones industrials gained 119.27 points to close at 11,219.70. That helped the index post its best weekly point gain since May 2005.

Spending on home building nose-dived in the second quarter, contributing to the slowdown in GDP, which measures the value of all goods and services produced within the United States.

The second-quarter’s performance marked the slowest pace since the final quarter of 2005. That’s when the economy, suffering fallout from the devastating Gulf Coast hurricanes, expanded at a feeble 1.8 percent pace.

Even though the economy cooled in the second quarter, inflation heated up.

An inflation gauge closely watched by the Federal Reserve showed that core prices – excluding food and energy – advanced at a 2.9 percent pace in the second quarter. That was up from a 2.1 percent growth rate in the first quarter and marked the highest inflation reading since the third quarter of 1994, when core inflation rose at a 3.2 percent pace.