Dow, S&P break records
Blue-chip averages hit intraday and closing highs after minutes from last central bank meeting add to bets that the Fed can lower rates again this year.
NEW YORK (CNNMoney.com) -- Stocks rallied Tuesday, with the Dow and S&P 500 ending at new records after the minutes from the last Fed meeting showed the bankers were unanimous in their decision to cut interest rates - and that they would be willing to cut rates further, if needed.
The Dow Jones industrial average (Charts) jumped more than 120 points, ending at an all-time high of 14,164.53, according to initial tallies. 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.
"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.
At the Sept. 18 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.
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."
However, stock gains may have been limited by the fact that equities have already been rallying for weeks on bets that the Fed will cut rates again this year.
Tuesday also brought the unofficial start of the quarterly earnings period with Alcoa (Charts, Fortune 500), scheduled after the closing bell. As is traditional, the aluminum manufacturer will be the first Dow component to report results. Wall Streeters will be looking for signs of how corporate profits are holding up amid the economic slowdown.
And 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.
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).
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.
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 $743.10 an ounce.
U.S. light crude oil for November delivery rose $1.24 to $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.