Stock surge continues as S&P 500 nears new high

(MoneyWatch) Stocks flirted with a new all-time high Thursday, as the S&P 500 closed just shy of its record.

The S&P 500 gained 9 points to close at 1,563.23, up 0.6 percent, just missing its previous high of 1,565 on Oct. 9, 2007. The Dow Jones industrial average has closed above its previous high, also reached on that same date more than five years ago, for eight straight days. It has risen for 10 days in a row, its longest winning streak since 1996. It added 84 points on the day to end at 14,539.

The Nasdaq closed at 3,259, up 14 points.

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While the Dow follows the stocks of 30 "blue-chip" companies, as a much broader index the S&P 500 is regarded by many to be a better gauge of investor sentiment. It may not be done rising.

"Our expectation that the U.S. S&P 500 would climb as high as 1,550 by mid-year may now look too cautious," analysts with research firm Capital Economics wrote in a report. "After all, the index has already nudged above that level this month and is showing little sign of fatigue. Implied volatility is also at a six-year low, suggesting few envisage a major setback around the corner."

Stocks were buoyed today by the Labor Department's latest jobless claims report, which showed that fewer Americans filed for unemployment benefits last week. Applications for aid fell to 332,000, while the four-week average shrank to 347,000, the lowest level since March 2008.

Other factors also have helped push stocks up in recent weeks. These include healthy personal consumption and retail sales; an ongoing rebound in the housing market; strong corporate earnings; falling oil prices; and expectations by investors that the Federal Reserve will continue to put downward pressure on interest rates well into 2014.

Those trends have coincided with a period of relative calm in the eurozone, as European leaders meet this week in Brussels to discuss the region's economy and other matters. Fears that China, another engine of global economic growth, could suffer a sudden economic downturn also have abated. For now, that is keeping investors feeling bullish.

"Since the start of the year, institutional investors seem to have stopped reacting to headline risk as quickly and intensely as they did since the start of the bull market," said Ed Yardeni, president and chief investment strategist for institutional investor advisory Yardeni Research.

While stocks have continued their surge, experts caution that financial markets are an unreliable measure of the broader economy. Economists expect the U.S. economy to expand only modestly in 2013, with most estimates predicting growth of 1.5 percent to 2 percent. Those estimates are down from earlier forecasts this year, as the sequester -- mandated government spending cuts that took effect March 1 -- begins to slice into growth.

Stock gains also have only a limited impact on most consumers' purchasing power because most shares are concentrated in the hands of large investors and the wealthy. Although personal income rose sharply in the last quarter of 2012, most of that increase came from an acceleration in dividend payments and interest income.