For the market, deal-making "remains a key driver," said Michael Malone, trading analyst at Cowen & Co. "It remains unpredictable and it remains hard to tell who's going to be taken out and when. That will continue as long as interest rates stay low."
News Corp.'s $5 billion bid for Dow Jones & Co. on Tuesday was followed by news that Cablevision Systems has agreed to be taken private by the founding Dolan family in a deal worth $10.5 billion.
The Dow industrials gained 75 points to close at 13,211, a new closing high. It earlier reached a new record high of 13,256.
Among the Dow's biggest gainers Wednesday were Dupont , Verizon , General Motors Corp. and American Express .
Citigroup Inc. rose 0.2% after saying it will buy financial services outsourcing company Bisys Group for $1.45 billion in cash.
The S&P 500 gained 9 points to 1,495, its highest closing level since September 2000. The broad index also touched more than a six-year high of 1,499.10.
The Nasdaq Composite gained 26 points to 2,557.8, its highest closing level since February 2001.
Shares of Dow Jones & Co. , publisher of this report, fell 0.4% Wednesday after surging 55% on Tuesday when News Corp. unveiled its unsolicited bid.
Although the Bancroft family, which owns a controlling stake in Dow Jones, indicated that it will narrowly vote against the offer, there was speculation that other bids might surface.
Elsewhere, Cablevision Systems rallied 9.9% after agreeing to be taken private in a $10.5 billion deal.
Cherry-picking economic data
News that factory orders rose 3.1% in March, ahead of the 2.2% expected by Wall Street economists, reassured investors about economic growth.
"On the stronger than expected factory order report at 10am, the averages took off to the upside accompanied by strong breadth," said Eliot Spar, strategist at Ryan, Beck & Co. "The market has become very sensitive to every minor and major economic release," he said.
At the same time, the market overcame a pre-opening report from ADP, which said private-sector jobs rose by only 64,000 in April, the weakest monthly growth in four years. The report precedes the official jobs report from the government on Friday.
"It's earnings season and people are focusing on earnings, but the figure reminded people that the labor market is softening," said Peter Boockvar, equity strategist at Miller Tabak.
According to Cowen's Malone, the market is now less concerned about slowing growth following evidence of receding inflationary pressures. "If growth were to slow further, the Fed would be in a position to cut rates," he said.
Still, the main argument of bulls on Wall Street has been that consumption, which represents over 70% of the economy, would be able to sustain growth as long as employment remains elevated.
On Monday, the Commerce Department reported that consumer spending, adjusted for inflation, was down 0.2% in the first quarter.
Should employment also show signs of weakening on Friday, the fundamental underpinnings of the market's rally would further shrink.
"The Dow has been outperforming for several weeks, as the fall in the dollar boosts interest in the large multi-national stocks," said Marc Pado, market strategist at Cantor Fitzgerald. "But if the strength in these stocks fails to broaden out to include the other major indices, we could see investors get a bit squeamish."
In the broad market for equities, trading volumes showed 1.6 billion shares exchanging hands on the New York Stock Exchange and 2.1 billion on the Nasdaq stock market. Advancing issues topped decliner by 3 to 1 on the NYSE and by 20 to 9 on the Nasdaq.
By sector, multimedia , industrials , telecoms , metals miners , airlines and broker/dealers all advanced strongly.
Stocks on the move
Time Warner Inc.'s stock was up 1.7%. The media company's quarterly net income dropped below year-earlier levels, but its earnings were above analysts' expectations.
Shares of Chipotle Mexican Grill Inc. jumped 17.9%. The restaurant chain reported a stronger-than-expected profit rise.
Gap Inc. rose 3.6%. It is considering potentially sizeable layoffs to help reduce expenses and also to eliminate the bureaucracy that has stifled creativity in recent years, The New York Post reported in its Wednesday editions.
Crude-oil futures also lent a hand to the market, falling after weekly data on U.S. supplies. Crude for June delivery fell $1.13 to $63.68 a barrel.
Treasurys shook off losses to trade higher, after the ADP report suggested that the monthly employment report will show weaker-than-forecast overall jobs creation. The benchmark 10-year Treasury note finished down 1/32 at 99-27/32, with a yield of 4.645%.
The Treasury Department announced that the quarterly refunding next week will total $32 billion, including $14 billion in 3-year notes. After next week's auction, the department will suspend issuance of 3-year notes, in light of a shrinking deficit.
The dollar pared its gains after the ADP report. The dollar rose 0.2% to 119.97 yen as the euro fell 0.1% to $1.3586.
Gold futures extended their prior-session losses, as crude-oil prices fell and the dollar posted some gains. Gold for June delivery fell $2.20 to $675.10 an ounce on the New York Mercantile Exchange.
By Nick Godt