NEW YORK The prospect of continued stimulus from the Federal Reserve and rising optimism among small business owners helped push stock prices back to record levels.
The Dow Jones industrial average rose 123 to 15,215, while the S&P 500 gained 16 to close at 1,650, both new records. The Nasdaq composite rose 23 points to 3,462.
Small business owners were slightly more optimistic in April, according to a survey released Tuesday by the National Federation of Independent Business. That helped push the Russell 2000, an index of small-company stocks, up 1 percent.
The Russell index is 15.7 percent higher since the start of the year, and is doing better than the Standard & Poor's 500 index, which includes larger, global companies. Small stocks are doing well because they are more focused on the U.S., which is recovering, and don't have as much revenue from recession-plagued Europe as larger companies do.
For stock investors, the U.S. economy is "not too hot, not too cold," says Michael Sheldon, chief market strategist at RDM Financial. It's weak enough that the Fed will continue its $85 billion-a-month economic stimulus program, but strong enough for companies to generate healthy earnings.
"There is a lot of momentum in the market right now," says Sheldon. "It's largely being fueled by the Federal Reserve and modest growth in the U.S."
The U.S. economy grew 2.5 percent in the first quarter. While hiring has picked up, the unemployment rate is still at 7.5 percent, above the 6.5 percent rate that the Federal Reserve is targeting. As a result the central bank is expected to keep buying bonds to hold down long-term interest rates and encourage more borrowing and spending.
Earnings of companies in the S&P 500 index, meanwhile, are expected to rise 5 percent in the first quarter, and grow even faster in the second half of the year, according to S&P Capital IQ.
The Dow rose 84 points, or 0.5 percent, to 15,176, as of 2:19 p.m. Eastern Daylight Time. The S&P 500 index rose 12 points, or 0.8 percent, to 1,645. Both are at all-time highs.
The market rose from the opening bell and climbed steadily throughout the morning before slowing in the early afternoon.
It got support after hedge fund manager David Tepper said that he is still bullish on stocks. Speaking on CNBC, Tepper said that investors shouldn't worry about the Fed tapering its stimulus program. The money manager has about $18 billion dollars under management, according to the broadcaster.
Banks and insurers rose 1.4 percent, the biggest gain among of the 10 industry groups in the S&P 500 index. Financial stocks are the biggest gainers in the index during the past month, advancing 5.7 percent.
Bank of America climbed to its highest in more than two years. The lender's stock rose 34 cents, or 2.7 percent, to $13.31. JPMorgan rose 57 cents, or 1.1 percent, to $50.23.
Stocks had a lackluster start to the week Monday as investors questioned whether stocks have risen too far, too fast this year. Even news that retail sales unexpectedly rose in April failed to give the market a boost. The Dow ended the day slightly down and the S&P 500 was flat.
The Dow has risen 15.8 percent this year and the S&P 500 index is 15.4 percent higher. The Dow will have gained for 18 straight Tuesdays if it closes higher. The only day with a longer streak of consecutive gains is Wednesday, with 24, according to Schaeffer's investment research.
Oil edged lower, falling 87 cents, or 0.9 percent, to $95.17 a barrel. Gold fell $9.80, or 0.7 percent, to $1,424.50. Copper dropped the most among major commodities, falling 7.2 cents, or 2.1 percent, to $3.288 a pound.
The dollar edged higher against the euro and the yen.