NEW YORK -- U.S. stocks rallied to fresh highs on Tuesday as investors picked up large-cap companies' shares on the expectation that central bank stimulus will help propel the rally further.
Gains were broad, but growth sectors outperformed their peers with bank stocks leading the way. Bank of America (BAC), up 2.8 percent at $13.34, was the Dow's biggest percentage gainer, while Citigroup (C) rose 2.4 percent to $50.09.
Wall Street has rallied without a significant correction since the start of the year, pushing major indexes to all-time records and pushing the S&P 500 up almost 16 percent for 2013 so far. The ascent has been driven in large part by the Federal Reserve's easy monetary policy, designed to stimulate the economy, though investors' focus has turned to when the Fed may start to rein in its bond-purchase program.
"The developed economies of the world are all easing aggressively, the money is looking for a home, and it's ending up in the stock markets," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
For now, investors are betting that the central bank will be careful not to remove its support too soon in order to not disrupt the economic recovery it is trying to foster, Hellwig said. So far, declines in the market have been met with buying and investors are trying to gauge how long that can last.
"People are indeed trying to participate in the rally, but at the same time, they're trying to be cautious," said Brad McMillan, chief investment officer of Commonwealth Financial, based in Waltham, Massachusetts.
The S&P 500 financial sector index rose 1.7 percent, while the S&P transports group index gained 1.4 percent.
The Dow Jones industrial average gained 123.57 points, or 0.82 percent, to a record 15,215.25 at the close. The Standard & Poor's 500 Index rose 16.57 points, or 1.01 percent, to end at a record 1,650.34. The Nasdaq Composite Index climbed 23.82 points, or 0.69 percent, to 3,462.61, its highest close since November 2000.
During the session, the Dow hit an all-time intraday high of 15,219.55, while the S&P 500 climbed to an all-time intraday high of 1,651.10. The Nasdaq touched a fresh 52-week high of 3,468.67.
The market had traded sideways for the past three sessions, showing a gain of just 0.07 percent as the winding down of the quarterly earnings season and a light economic calendar have left investors without a strong catalyst for further gains.
The Dow's gains were limited by weakness in Intel (INTC), down 1 percent at $23.84, and UnitedHealth Group (UNH), off 1.1 percent at $61.73.
U.S.-listed shares of Sony (SNE) jumped 9.9 percent to $20.76 after billionaire hedge fund investor Daniel Loeb called on the company to spin off its lucrative entertainment arm.
Nokia (NOK) unveiled a new version of its Lumia smartphone line, but U.S.-listed shares fell 5.2 percent to $3.64. Research company Gartner said Nokia lost 5 percentage points of market share in the first quarter, falling to 14.8 percent.
Solar power companies' shares fell after Trina Solar (TSL) estimated lower panel shipments than a previous outlook and said its results would be hurt by a foreign currency exchange loss. The stock fell 8.8 percent to $5.41, while Yingli Green Energy (YGE) slid 6.3 percent to $2.36.
Most corporate earnings have been better than expected this quarter. With 90 percent of the S&P 500 companies having reported results so far, 67.2 percent have topped earnings expectations, according to Thomson Reuters data, which is even with the average over the past four quarters. However, only 46.9 percent have beaten revenue expectations, below the 52 percent average over the past four quarters.
16 Big Bubbles That Are Getting Ready To Burst
Stock Markets Jump as Banks Lead Dow, S&P to New Highs
What the experts say: "The cost of college textbooks has been rising at almost twice the rate of general CPI inflation for at least the last 30 years," according to Mark J. Perry, American Enterprise Institute. "As Glenn Reynolds reminds us, 'a process that cannot go on forever, won't,' and the college textbook bubble is certainly one of those processes."
Warning stat: First tier cities Beijing and Guangzhou saw home prices rise 3.1 percent in February, the biggest jumps in the country. Meanwhile, entire towns will go up in China with no inhabitants. These are China's notorious "ghost cities."
Warning stat: The "crypto currency" now trades at $63 -- double what it was at the beginning of March.
What the experts say: "In hindsight, the people who bid the price of Bitcoins up to $30 in 2011 may not have been so crazy after all. It just took the broader market, including me, a couple of years to catch up with them," according to Ars Technica's Timothy B. Lee.
Warning stat: Investors recently bid a record $3.16 for each dollar of the $2.011 trillion in bonds the U.S. government auctioned in 2012, Bloomberg says.
What the experts say: "Long-term interest rates are now unsustainably low, implying bubbles in the prices of bonds and other securities," warns economist Martin Feldstein. "When interest rates rise, as they surely will, the bubbles will burst, the prices of those securities will fall, and anyone holding them will be hurt."
Warning stat: American farmland prices continue to grow at a blazing hot double-digit rate. An industry group recently forecast that values could surge 15 percent to 20 percent in 2013.
What the experts say: "It doesn't have all the hallmarks of a bubble," according to Robert Shiller. "One of them is most people have never heard of it. In my view of a bubble, it's something that gets people excited. Well, some people are excited, but most people don't even know about it."
What the experts say: "The real question in my mind is, 'Are we possibly off to the races again?'" asked economist Robert Shiller. "I think in cities like Phoenix and San Francisco, we might be seeing something pretty big developing. People there are very speculative-minded."
Warning stat: Health care spending has grown 2.5 times faster than incomes over the past 30 years.
What the experts say: "The health care system in the U.S. reminds us somewhat ominously of the bubble in housing finance, a 'public/private partnership,'" says Citi's Steve Wieting. "Housing consumption still receives strong tax preferences, as does health insurance (reflecting underlying health care consumption). Most aptly, prior to quasi-nationalization, housing GSEs earned private profits from public subsidies for housing, as do U.S. health care providers."
Warning stat: Europe stabilized after ECB president Mario Draghi said, "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."
What the experts say: "To us the key word about the post summer 2012 Euro Area asset boom is that most of it is a bubble, and one which will burst at a time of its own choosing, even though we concede that ample liquidity can often keep bubbles afloat for a long time," warns Citi Chief Economist Willem Buiter.
Warning stat: Prices are up 47 percent year-over-year, and are sitting at an 8.5 year high of $432 per 1,000 board fee.
What the experts say: "Signs of a housing bubble in the world's most populous nation may force the Chinese government to take measures to 'draw air' out of the rising housing market and to clamp down on construction lending, which would likely put a significant dent in the demand for building materials such as Lumber and Copper," according to Mike Zarembski, OptionsXpress.
What the experts say: Jeff Gundlach notes that not only have wages not increased commensurate with tuition inflation, wages have actually been falling. "What have all these soaring tuition costs got you?" asked Gundlach rhetorically.
Warning stat: Craft beer production surged 15 percent year-over-year in 2012.
What the experts say: Boston Beer Co. founder Jim Koch says most stores have reached their limit for carrying new breweries, and that too many breweries are making similar beers without adding anything to the market.
Warning stat: Canadian home prices mirrored the U.S. housing rally. However, Canadian prices never fell. A recent Canadian Housing Affordability study says the country's home market is 10 percent overvalued.
What the experts say: "I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S," said Robert Shiller.
What the experts say: "What we find is that Bernanke does not have nearly as great a track record on inflation as he thinks he has. Greenspan could not see that the housing market was an inflated bubble. Evidently Bernanke cannot see that the stock market is an inflated bubble."