Dow tops 18K for first time, as stocks stay hot

The Dow Jones industrial average crossed a new psychological milestone Tuesday, with investors getting a dose of holiday cheer from the U.S. economy.

The blue-chip index closed above 18,000 points for the first time, gaining 65 points, or 0.4 percent, to end the day at 18,024. The Standard & Poor's 500 also finished in record terrain, adding 4 points to 2,082. The Nasdaq composite index lost 16 points to 4,765 points.

Stocks pushed mostly higher amid several economic readings that showed the recovery is gaining strength. The U.S. Commerce said that gross domestic product -- the total value of goods and services -- shot up to 5 percent in the third quarter, the fastest rate of expansion since 2003. That was much stronger than the agency's initial 3.9 percent estimate of growth for the period.

The economy grew 4.6 percent in the second quarter, making it the first time in 11 years that GDP has risen at least 4 percent for two straight quarters.

Wage growth also has picked up of late, which is expected to drive consumer spending. Also on Tuesday the government said that personal income in November rose 0.4 percent, up from 0.3 percent the previous month. Disposable personal income grew 0.3 percent, in line with last month. Workers have seen tepid earnings growth throughout the recovery, holding back consumer spending.

Market watchers tend to downplay the significance of stock indexes crossing new thresholds. The Dow, which tracks 30 big company stocks, also offers a narrower lens on financial markets than the broader S&P 500 and other indexes. December is also usually the strongest month for large-cap stocks, suggesting that the Dow could struggle to sustain its recent momentum next year.

Still, stocks' steady drift upward this year has surprised some analysts. Crossing 18,000 is the Dow's second 1,000-point milestone this year after closing above 17,000 for the first time in July.

Financial markets have received a lift lately from the Federal Reserve signaling that it doesn't expect to start raising interest rates until the middle of 2015 at the earliest.

Those trends bode well for the bull market run, which is on track to mark its sixth year in March. Despite weak growth overseas, geopolitical troubles and other concerns, investors have repeatedly bet on the U.S. economy and corporate earnings growth this year, pushing stock prices higher.

"This is going to end up being a bit better of a year for stocks and bonds than most people thought coming in," said Bob Doll, chief equity strategist at Nuveen Asset Management. "The economy caught some steam and it's able to stand up with its own two feet."

The all-time highs set by the Dow and S&P 500 Monday and Tuesday are the latest in a long string of records. Through Monday, the S&P 500 had set 50 record closes this year, while the Dow has set 35, according to S&P Dow Jones Indices. All told, the S&P 500 is up 12.7 percent this year, while the Dow has gained 8.9 percent.

Despite being at record highs, stocks are not overvalued, said Cameron Hinds, regional chief investment officer at Wells Fargo Private Bank.

"You have to understand that U.S. economic output is at an all-time high and corporate profits are at an all-time high," Hinds said. "Bull markets typically don't die purely of old age, they tend to die of recessions and overvaluation and perhaps policy mistakes, and we don't see any of those on the horizon."

In other trading on Tuesday, oil prices stabilized after a recent rout as the positive U.S. economic data raised expectations for demand. Benchmark U.S. crude rose $1.86 to close at $57.12 a barrel. The price has fallen by about half from a peak of $107 a barrel in June due to abundant supplies and waning global demand for energy.

U.S. government bond prices fell. The yield on the 10-year Treasury note rose to 2.24 percent. In metals, gold slipped $1.80 to $1,178 an ounce. Silver edged up eight cents to $15.77 an ounce and copper slipped less than a penny to $2.87 a pound.