Breakthrough for the Dow

The Nasdaq and the S&P 500, which raced ahead far faster during the technology and telecommunications stock market bubble of the late 1990s, have more ground to make up than the Dow. The Nasdaq remains 54 percent below its all-time high of 5048.62, hit on March 10, 2000. The S&P 500 is still 16 percent below its bull market high of 1527.46, reached on March 24, 2000.

Wells Fargo Investments economist Scott Anderson said much of the current rally is based on a belief among investors that the Federal Reserve will stop raising interest rates in the near future. After a dismal December, the market began its latest climb last Tuesday, when the Fed released minutes from a December meeting in which policymakers said the number of future rate increases "probably would not be large." Higher interest rates make it harder for companies to borrow and expand. Higher rates also tamp down consumer spending, by far the biggest driver of the economy.

Anderson said rising consumer confidence, combined with heavy government spending on rebuilding in the Gulf Coast and corporate spending on new information technology, could help support the current market rally. "All of these factors are combining at the right time," he said.

Jack Ablin, chief investment officer at Harris Private Bank, noted that stocks in the S&P 500 now trade at about 14.9 times their expected earnings, slightly below the historic average of 15. That means stocks do not appear overvalued, as they did during the bubble years. "There are some elements in place that should make further near-term gains easier," he said.

Several traders said they were just happy to finally put the big, round number behind them so they could stop worrying about it. "It was a little slow and plodding, but we got there. And it's been a long time coming," said Todd Leone, head of trading at SG Cowen. "Now we'll just see if we can carry it through tomorrow."

Movers

J.P. Morgan Chase added 65 cents, to finish at $40.67, after its upgrade to "neutral" by Prudential Equity Group, which issued an improved outlook for investment banking and asset management firms.

Texas Instruments sank 27 cents, to $34.18. It said it is selling its sensors and controls business to Bain Capital for $3 billion and instead will shift its focus to digital signal processing and analog chips.

International Business Machines fell $1.22, to $83.73. J.P. Morgan lowered IBM one notch to "neutral," saying that potential growth is already reflected in its stock price but that several risk factors in services and hardware are not yet being considered.

Amazon.com dropped 79 cents, to $47.08. J.P. Morgan also said it expects Amazon.com's growth will lag the broader U.S. e-commerce market, and cut the stock to "underweight."

Indexes

New York Stock Exchange composite index rose 21.76, to 8053.42.

American Stock Exchange index rose 4.56, to 1809.02.

Russell 2000 index of smaller-company stocks rose 6.55, to 706.24.

Volume

NYSE: 2.33 billion shares, down from 2.48 billion on Friday. Advancers outnumbered decliners 2 to 1.

Nasdaq: 2.0 billion shares, down from 2.29 billion. Advancers narrowly outnumbered decliners 11 to 7.

Commodities

Light, sweet crude oil for February delivery: $63.50, down 71 cents.

Gold for current delivery: $549.10 a troy ounce, up from $539.70 on Friday.

Associated Press contributed to this report.