Dow, S&P break records

NEW YORK (CNNMoney.com) -- Stocks rallied Tuesday, sending the Dow and S&P 500 to all-time highs as investors breathed a sigh of relief that the minutes from the last Fed meeting supported hopes for another interest rate cut by the end of the year.

The Dow Jones industrial average (Charts) jumped more than 120 points, ending at an all-time high of 14,164.53. The blue-chip barometer had hit an intraday high of 14,166.40 shortly before the close.

The broader S&P 500 (Charts) index hit a record intraday high of 1,565.26 right before the close, and ended the session just short of that at 1,565.15.

The tech-heavy Nasdaq composite (Charts) added 0.6 percent, ending at a fresh 6-1/2 year high.

Stocks drifted higher through the morning, flattened out in the early afternoon and then began to rise as investors digested the minutes from the Sept. 18 Fed meeting, released at around 2:00 p.m. ET.

"The market had a desire to keep going up and there was nothing in the minutes to prevent it," said Paul Mendelsohn, president and chief investment officer at Windham Financial Services.

Mendelsohn said that investors were a little cautious leading into the minutes but once they saw that there was nothing particularly surprising in the minutes, they redoubled their efforts to move stocks higher.

The Dow and S&P 500 carving out fresh all-time highs will give the stock market more ammunition in the short term, he said, provided that the earnings don't derail the momentum.

Investors already know that third-quarter earnings growth will be at the slowest pace in more than five years. But outside of the financial and homebuilding sectors, there may be expectations for results to beat, particularly in the case of multi-national companies that should benefit from the weak dollar, Mendelsohn said.

After the close, Alcoa (Charts, Fortune 500) reported results, unofficially beginning the earnings reporting period, as is tradition. The aluminum maker and Dow component reported earnings of 64 cents per share, up from 62 cents a year earlier and 2 cents short of forecasts. Revenue fell from a year ago, but met forecasts.

Not only did the Dow and S&P 500 end at new records, but the bull market turns five today, by most estimations. A three-year bear market finally found a bottom in October of 2002, giving investors some stability after a rough period influenced by the end of the late 1990s tech boom, the 9/11 attacks, and subsequent recession.

On Oct. 9, 2002, the S&P 500 closed at 776.76, and hit an intraday low of 768 during the next session, before rebounding. Since that time, the S&P 500 has jumped more than 100 percent.

According to a recent survey by Standard & Poor's Sam Stovall, this is the fourth longest bull market on record, with the bull run between 1990 and 2000 taking the honors for the longest ever recorded.

At the Sept. 18 Fed policy meeting, central bankers cut interest rates for the first time in 4 years. The minutes showed that the decision to cut the fed funds rate by a half-percentage point cut was unanimous, with the central bank worried the housing implosion and credit market crunch could hit consumers and the broader economy.

Also important to stock investors: the minutes showed that the bankers were a bit more confident about a sustained inflation drop, provided that the dollar doesn't keep falling.

Stock investors have been looking for evidence that the Fed will cut the fed funds rate by at least another quarter-percentage point, perhaps at the next policy meeting, which ends on Oct. 31.

The minutes seemed to provide that evidence because of the combination of the concern about the economy and the diminished concerns about inflation.

"I think the market had a knee-jerk reaction to the idea that the Fed can cut rates more, if they need to," said Steven Goldman, market analyst at Weeden & Co.

Goldman said that while the minutes didn't particularly reveal anything new, investors were probably relieved to see the central bankers "confirming what people have been thinking anyway."

Stock gains were broad, with 25 out of 30 Dow components jumping, led by American Express (Charts, Fortune 500), General Electric (Charts, Fortune 500), Caterpillar (Charts, Fortune 500) and Exxon Mobil (Charts, Fortune 500).

Fast food chain YUM Brands (Charts, Fortune 500) reported higher quarterly profit late Monday, sending its shares about 5 percent higher Tuesday.

Sprint Nextel (Charts, Fortune 500) said late Monday that CEO Gary Forsee will resign, effective immediately, and that the company's fiscal 2007 revenue will miss earlier forecasts. Shares gave up around 2 percent.

Beer brewers SABMiller and Molson Coors Brewing (Charts, Fortune 500) said they'll combine, their U.S. operations in an effort to take on brewing leader Anheuser-Busch (Charts, Fortune 500).

Shares of mortgage lender Thornburg Mortgage (Charts), which was hard hit by this summer's subprime mortgage meltdown, tumbled nearly 9 percent after the company said its quarterly loss will be bigger than it initially thought.

Sallie Mae (Charts, Fortune 500) filed a lawsuit that seeks to force its private equity buyers to either follow through on the proposed $25 billion deal or pay a $900 million breakup fee. A group of buyers led by J.C. Flowers has balked at completing the deal at its original price.

Market breadth was mixed. On the New York Stock Exchange, winners and losers were narrowly mixed on volume of 620 million shares. On the Nasdaq, decliners beat advancers four to three on volume of 1.13 billion shares.

Treasury prices fell after the minutes, raising the yield on the benchmark 10-year note to 4.65 percent from 4.64 percent late Friday. Treasury markets were closed Monday for the Columbus Day holiday. Bond prices and yields move in opposite directions.

COMEX gold for December rose $4.40 to settle at $743.10 an ounce.

U.S. light crude oil for November delivery rose $1.24 to settle at $80.26 a barrel on the New York Mercantile Exchange after slumping $2.20 in the previous session.

In currency trading, the dollar rose against the euro and yen.

-- Staff writer David Ellis contributed to this report.