By Kate Gibson and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) -- The Dow Jones Industrial Average leapt to a new high on Tuesday, surpassing levels reached more than five years ago, on indications of an improving U.S. economy.
Up 8.8% for the year so far, the more than century-old blue-chip index posted its first finish above the record closing high of 14,164.53 set on Oct. 9, 2007, ahead of the global financial meltdown.
"I think of it as the 'Rip Van Wrinkle' event; five years ago the Dow was at its previous high and then we had a nightmare called the 'Great Recession,' and now we are waking up from it," said James Angel, an associate professor of finance at Georgetown University's McDonough School of Business.
"The market is basically saying there is not a lot of bad news out there. The sequester came, and the world did not end on March 1; the war in Afghanistan is winding down; the energy situation seems to be improving; and the housing market is on the mend. The world is not ending and I think that is being reflected in stock prices," Angel added.
The Dow industrials (DJI) gained 125.95 points, or 0.9%, to end at 14,253.77, after rising to 14,286.37, easily topping its all-time intraday high of 14,198.10, set on October 11, 2007. See: IBM led gains in Dow's return to record territory.
See commentary: What's the big deal about the 2007 highs?
The market's four-year climb off the 2009 lows that followed has Wall Street bidding farewell to losses that came with the financial crisis, as monetary stimulus from the Federal Reserve and corporate-profit expansion supported Wall Street's recovery.
The Dow industrials fell 34% in 2008 as the housing bubble burst and the federal government moved to rescue the U.S. banking system.
"Last time we were here the economy was heading in a different direction, it was peaking and heading off a cliff," said Art Hogan, market strategist at Lazard Capital Markets.
"The good news is the market has put in a new high, and we're actually at a better place than the last time we were at this level," he added.
The S&P 500 index (SPX) rose 14.59 points, or 1%, to 1,539.79, with technology leading gains among its 10 major industry groups, all of which advanced. It closed 25 points from all-time high hit on Oct. 9, 2007.
The Nasdaq Composite (RIXF) climbed 42.10 points, or 1.3%, to 3,224.13. See: Apple's not in the Dow, thank goodness.
For every stock that fell, roughly three gained on the New York Stock Exchange, where composite volume approached 3.6 billion.
"Momentum and the fear of underperformance are the driving forces that take on a life of their own," noted Elliot Spar, market strategist at Stifel, Nicolaus & Co., in afternoon commentary.
The price of commodities also rose, with oil futures for April delivery (CLJ3) adding 70 cents, or 0.8%, to end at $90.82 a barrel. Gold gained for a second session, with futures for March delivery (GCH3) rising $2.50, or 0.2%, to end Tuesday's session at $1,574.60 an ounce. Futures for the more active April contract (GCJ3) also rose $2.50, or 0.2%, to finish at $1,574.90 an ounce. (Read more on gold futures: http://www.marketwatch.com/story/gold-rebounds-from-three-day-price-decline-2013-03-05.)
Equities extended their rally after the Institute for Supply Management released its index of nonmanufacturing activity, which climbed to 56% in February from 55.2% the month before. See: Index of business conditions jumps to highest level in one year.
"It's a very solid reading that usually doesn't get much attention," said Hogan .
Noteable movers included shares of Qualcomm Inc. (QCOM) up 2% after the computer-chip maker raised its dividend by 40% and created a $5 billion share-buyback program.
American Apparel Inc. (APP) rallied nearly 19% after the retailer projected 2012 sales that beat estimates; J.C. Penney Co. (JCP) shares fell almost 11% after a large shareholder sold a portion of its holdings.
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