As economy gains speed, Dow hits new milestone

Stocks surged higher on Tuesday, as the Dow Jones industrial average reached 18,000 points for the first time.

Traders have been encouraged by signs of strength in the U.S. economy and reassurances that the Federal Reserve won't raise interest rates soon.

There was more encouraging news early Tuesday as the U.S. government reported that the economy powered ahead at a 5 percent annual rate in the third quarter. That was the fastest pace in more than a decade.

Perhaps even more important, long-stagnant wages are starting to increase. 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.

"After four years of rocky recovery the U.S. economy is now hitting its stride, with a notable acceleration in growth in recent quarters," said Gus Faucher, senior economist with PNC Financial Services Group, in a note. "And growth should remain good next year, with lower gasoline prices a big plus for consumers."

The Dow Jones industrial average rose 55 points, or 0.3 percent, to 18,014 as of 9:48 a.m. Eastern. The Standard & Poor's 500 also climbed to a new high, rising six points, or 0.3 percent, to 2,084, up from Monday's record close of 2,078. The Nasdaq composite index was largely flat.

Major stock indexes have ended higher the past four trading days, with the Dow and S&P 500 closing at record highs on Monday. Trading volume is expected to thin out the next couple of days as the market shifts into Christmas holiday mode. On Wednesday, U.S. and European markets close early.