Dow in a record groove

NEW YORK (CNNMoney.com) -- The Dow Jones industrial average hit another record close Wednesday, as investors welcomed further signs that the economy is slowing at a moderate pace, and not heading for recession.

The Dow (up 33.70 to 12,251.71, Charts) rose 0.3 percent to close at a record for the second straight session, and also hit a trading record during the session. The blue-chip barometer has now closed at a record 16 times since Oct. 3.

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The broader S&P 500 (up 3.35 to 1,396.57, Charts) index added 0.2 percent to close at its highest level since Nov. 9, 2000.

The tech-fueled Nasdaq composite (up 12.09 to 2,442.75, Charts) surged 0.5 percent to reach its highest close since Feb. 15, 2001.

Thursday brings the release of the closely watched consumer price index (CPI) for October. Investors will also take a look at the weekly jobless claims report, October reads on industrial production and capacity utilization, and the November Philadelphia Fed index, a regional report on manufacturing.

Stocks likely to be active Thursday include Applied Materials (Charts), which reported higher quarterly earnings and revenue after the close that was nonetheless shy of forecasts. Shares inched lower in extended-hours trading

No market-moving earnings are due before the start of trade Thursday. However, after the bell, Dell (Charts), Hewlett-Packard (Charts), Gap (Charts) and Starbucks (Charts) are all set to report results.

A robust manufacturing report and potential $8 billion merger in the airline industry got the ball rolling Wednesday morning, with stocks rising out of the gates.

The strongly bullish tone enabled investors to take in stride a selloff in Treasurys and subsequent run up in bond yields, with only the rate-sensitive financial sector showing a reaction. Even a bounce back in oil prices failed to rile the bulls, instead sparking some gains in the underlying oil services stocks.

But the day's most-anticipated event was the afternoon release of the minutes from the October Fed meeting. Although the minutes didn't offer any big surprises, they did reinforce that the economy is headed for a so-called "soft landing" and that the Fed remains focused on cutting inflation.

Stocks briefly surged to session highs right after the 2 p.m. ET release of the minutes. However, gains were clipped a bit by the realization that the minutes also suggested the central bank is unlikely to cut interest rates anytime soon.

"I think it's calling more into question what the Fed will do going forward," said Eugene Peroni, senior managing director at Claymore Advisors.

Despite uncertainty about the future course of interest rates, the records the Dow and other gauges have set keep attracting investors into the market throughout the afternoon, Peroni said.

Stocks have been rallying in recent months on solid earnings and bets that the economy is headed for a so-called "soft landing."

These factors are likely to support the market for the rest of the year, said Harry Clark, CEO of Clark Capital Management.

"There's still a lot of money around to be invested," Clark said. "I think people are scared to miss out on the rally."

He said seasonal factors are working in the market's favor, as well, with November and December tending to be buoyant months on Wall Street.

Helping contribute to the upbeat tone Wednesday was the NY Empire State index. The reading on manufacturing in the New York region rose unexpectedly. The surprise gain reinforced the belief that while the economy is slowing, it is not heading for a so-called "hard landing."

A potential $8 billion merger in the airline industry also lifted stocks. US Airways made a surprise cash and stock bid for larger rival Delta. (Full story). Shares of US Air (up $8.57 to $59.50, Charts) rallied almost 17 percent, while shares of bankrupt carrier Delta climbed 3 percent on the over-the-counter market.

US Air's bid for Delta spurred a rise in airline stocks, as investors bet the deal would spark more consolidation in the troubled industry.

Among the movers, AMR (up $1.65 to $32.33, Charts) gained 5.4 percent, JetBlue (up $1.04 to $15.13, Charts) rose 7.4 percent, Continental (up $4.72 to $43.08, Charts) added 12.3 percent and Airtran Holdings (up $1.76 to $12.83, Charts) surged almost 16 percent.

The Amex Airline (up 3.03 to 60.87, Charts) index rallied 5.2 percent.

Google (up $2.63 to $491.93, Charts) inched higher, moving close to $500 a share. Credit Suisse resumed coverage of the web search leader with an "outperform" rating and price target of $600 a share.

A variety of other big tech stocks gained, including Intel (up $0.44 to $22.32, Charts), eBay (up $0.89 to $33.92, Charts) and Amazon.com (up $1.09 to $42.60, Charts).

On the downside, Comverse Technology (down $2.95 to $17.69, Charts) plunged 14.3 percent after the telecom software maker said it found more accounting problems in addition to existing errors related to its stock option practices.

HP (down $0.88 to $39.79, Charts) was the biggest decliner on the Dow, shedding over 2 percent a day before it is due to report quarterly earnings.

Market breadth was positive. On the New York Stock Exchange, winners topped losers five to three on volume of almost 1.7 billion shares. On the Nasdaq, advancers topped decliners by three to two on volume of 2.16 billion shares.

Treasury bond prices slumped, lifting the yield on the benchmark 10-year note to 4.62 percent, up from 4.57 percent late Tuesday. Bond prices and yields move in opposite directions.

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

U.S. light crude oil for December delivery rose 48 cents to settle at $58.76 a barrel on the New York Mercantile Exchange. The price of oil rose after the weekly oil inventory report showed a surprisingly large drop in gasoline supplies and distillate stocks, used to make heating oil.

COMEX gold fell $1.50 to settle at $623.80 an ounce.

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