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Dow: Record high for 2nd day
Wall Street has a party as more investors jump on record-setting bandwagon; oil higher; gold tumbles.
By Alexandra Twin, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- Stocks surged Wednesday as investors worried they were missing the party on Wall Street jumped in, pushing the Dow Jones industrial average to its second straight record close.

The 30-share Dow (up 123.27 to 11,850.61, Charts), the world's most widely watched stock market gauge, climbed 1.1 percent after notching a record high Tuesday, when it knocked out the old record from January 2000, at the tail end of the tech-driven boom of the late 1990s.

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The S&P 500 (up 16.11 to 1,350.22, Charts) index added 1.2 percent, closing at its highest since February 2001. The tech-fueled Nasdaq composite (up 47.30 to 2,290.95, Charts) jumped 2.1 percent.

Wednesday's big gains may have come from "performance chasing," said David Briggs, head of equity trading at Federated Investors, noting the tendency of investors to pile in after they see the market making record highs, for fear of missing out on a bigger rally.

"It's amazing to me how all the bad news has disappeared," Briggs said, adding, "News on the weakening economy is seen as positive, because it means the Fed is done."

The Federal Reserve pausing in August and September after two years of interest rate hikes is one of the big reasons for the recent stock rally. Falling oil is another one. Investors dislike higher rates since they slow the economy and hurt corporate earnings.

The Dow also hit a new trading high of 11,850.85 during the session, before closing just below that.

Treasury prices rose, the dollar was mixed and gold tumbled for a second session.

Stocks opened with little fanfare but soon turned higher, as investors welcomed mixed economic news and falling Treasury yields. The stock gains increased as the session wore on.

Briggs said that while the momentum is positive now, investors shouldn't be surprised if there's a pullback later in the fourth quarter or early next year.

The day's economic reports served to further bets that the economy is slowing, but not heading for recession, and that the Fed will not have to raise rates again. That sent bond prices rallying and yields, which move in the opposite direction, tumbling.

Afternoon comments from Fed Chairman Ben Bernanke proved reassuring as well. Bernanke said that the housing market slowdown will cut into economic growth both this year and next. But he also said that continued low mortgage rates and the strong job market will help take the edge off the housing slowdown.

"It's encouraging to see the Dow hitting all-time highs," said Michael Sheldon, chief market strategist at Spencer Clarke. "It partly reflects the rotation in the market that we've seen over the last few months with large-cap stocks starting to outperform small-cap stocks, at least in the U.S."

He added though that odds are growing for a short-term correction or bout of profit taking, after the market's big late summer-early fall rally.

August factory orders were unchanged after falling a revised 0.6 percent the previous month. Economists surveyed by Briefing.com thought orders would fall 0.2 percent.

The Institute for Supply Management's September read on the services sector of the economy fell to 52.9, below forecasts for a drop to 56 from 57 in August. A reading above 50 points to expansion in the sector.

U.S. light crude oil for November delivery rose 73 cents to $59.41 a barrel on the New York Mercantile Exchange, gaining after tumbling to a 7-month low on Tuesday. Oil prices had initially see-sawed following a mixed weekly oil inventories report in the morning.

But the turnaround in oil did not unsettle investors and instead sparked a recovery in recently battered oil stocks, including Exxon Mobil (up $1.20 to $66.61, Charts).

What's moving?

A variety of hardware, software and Internet shares gained, lifting the Nasdaq.

Biotech, bank, healthcare and telecom stocks gained too, supporting the broader market.

Among Dow issues, 27 out of 30 stocks gained, led by Boeing (up $2.18 to $83.96, Charts), Intel (up $0.25 to $20.82, Charts), IBM (up $1.45 to $83.10, Charts), Microsoft (up $0.57 to $27.94, Charts) and Altria (up $1.26 to $76.90, Charts).

Dow stock General Motors (down $0.09 to $33.32, Charts) was one of the 3 decliners. The automaker ended modestly lower on news the automaker's talks with Renault-Nissan about an alliance have ended without a deal.

Ford Motor (down $0.09 to $33.32, Charts) climbed 4 percent in active trade on speculation that Renault-Nissan might now approach GM's rival.

Dow component Wal-Mart Stores (Charts) ended higher, recovering from earlier losses after it revised its September same-store sales lower. Earlier in the week, the retailer said sales at stores open a year or more had risen 1.8 percent, but now it says the correct number is 1.3 percent, near the low end of the range it initially gave investors.

Valero Energy (up $1.93 to $50.10, Charts) jumped after saying late Tuesday that it expected to report record third-quarter earnings.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than 3 to 1 on volume of nearly 1.86 billion shares. On the Nasdaq, advancers topped decliners by 11 to 5 on volume of 2.24 billion shares.

COMEX gold for December delivery sank $14.70 to $566.80 an ounce, after slumping more than $22 Tuesday.

Treasury prices rallied, lowering the yield on the 10-year note to 4.57 percent from 4.61 percent late Monday. Bond prices and yields move in opposite directions.

In currency trading, the dollar gained versus the euro and slipped against the yen.


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