NEW YORK -- The stock market marched back into record territory as investors seized on the latest encouraging news about the economy. On Tuesday, it was a report on the health of small businesses.
Small business owners were slightly more optimistic in April, according to a survey by the National Federation of Independent Business. That helped push the Russell 2000, an index of small-company stocks, up 1.3 percent.
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The Russell index is 16.1 percent higher since the start of the year, and is up more than the Standard & Poor's 500 index, which includes larger, global companies. Small stocks are doing well partly because they are more focused on the U.S., which is recovering, and don't get as much revenue from recession-plagued Europe as larger companies do.
The advance in small-company stocks is another sign of how optimistic investors have become. Smaller stocks are more risky than large ones, but also offer investors the prospect of greater returns.
"Small businesses are in many ways the backbone of the economy ... to see that index move up was a positive surprise," said Quincy Krosby, market strategist for Prudential Financial. "Overall, the market wants to move higher and it's hard to fight that."
Another closely watched stock market indicator has also been on a tear: transportation stocks. The Dow Transport average rose 1.9 percent Tuesday and is up 21.8 percent this year, far more than other major indexes. Investors often see these stocks as an indication of where the economy is going. When companies make and ship more goods, the thinking goes, truckers, airlines and railways have more business.
The prospect of continued stimulus from the Federal Reserve has also supported the market's run-up.
For stock investors, the U.S. economy is "not too hot, not too cold," says Michael Sheldon, chief market strategist at RDM Financial. It's weak enough that the Fed will continue its $85 billion-a-month economic stimulus program, but strong enough for companies to generate healthy earnings.
"There is a lot of momentum in the market right now," says Sheldon. "It's largely being fueled by the Federal Reserve and modest growth in the U.S."
The U.S. economy grew 2.5 percent in the first quarter. While hiring has picked up, the unemployment rate is still at 7.5 percent, above the 6.5 percent rate that the Federal Reserve is targeting. As a result the central bank is expected to keep buying bonds to hold down long-term interest rates and encourage more borrowing and spending.
Earnings of companies in the S&P 500 index, meanwhile, are expected to rise 5 percent in the first quarter, and grow even faster in the second half of the year, according to S&P Capital IQ.
The Dow rose 123.57 points, or 0.8 percent, to 15,215.25. The S&P 500 index rose 16.57 points, or 1 percent, to 1,650.34 Both are at all-time highs.
The market rose from the opening of trading and climbed steadily throughout the day.
It got support after hedge fund manager David Tepper said that he is still bullish on stocks. Speaking on CNBC, Tepper said that investors shouldn't worry about the Fed tapering its stimulus program. The money manager has about $18 billion under management, according to the broadcaster.
All 10 industry groups in the S&P 500 index rose, led by a 1.7 percent increase in banks and insurers. Financial stocks are up the most in the past month, 6.1 percent.
Bank of America climbed to its highest in more than two years. The stock rose 36 cents, or 2.8 percent, to $13.34. JPMorgan rose 56 cents, or 1.1 percent, to $50.23.
The Dow has risen 16.1 percent this year, the S&P 500 index 15.7 percent. The Dow has gained for 18 straight Tuesdays. The only day with a longer streak of consecutive gains is Wednesday, with 24 back in 1968, according to Schaeffer's Investment Research.
The Nasdaq composite index rose 23.82 points, or 0.7 percent, to 3,462.61. The Dow Transport index, which many investors consider a gauge of future economic activity, rose 121.78 points, or 1.9 percent, to 6,445.78.
BIG MOVERS IN STOCKS:
-- Sony's U.S.-listed shares jumped 10 percent after hedge fund manager Daniel Loeb called for the company to sell part of its entertainment business and use the money to shore up its struggling electronics operation. The stock rose $1.87 to $20.76.
In government bond trading, the yield on the 10-year Treasury note rose to 1.97 percent from 1.92 percent late Monday, as investors shifted money out of bonds and into riskier assets like stocks. It's the highest level for the yield since mid-March.
The yield on the note hit a low for the year of 1.63 percent on May 1. It surged higher two days later after the government reported a strong increase in hiring over the past three months.
The yen weakened against the dollar. One dollar bought 102.24 Japanese yen as of late Tuesday, up from 101.93 yen late Monday. The dollar surged above 100 yen last week for the first time in four years. Japan's currency has been falling as the country's central bank floods the Japanese economy with cash in an effort to revive it from a two-decade slump. The euro edged down to $1.294 from $1.297.
The strengthening dollar weighed on commodities. When the dollar rises, it makes dollar-denominated commodities like crude oil more expensive to investors using other currencies, like yen and euro. That tends to decrease demand for those goods, driving their prices lower.
The price of crude oil fell 96 cents, or 1 percent, to $94.21 a barrel. Gold fell $9.80, or 0.7 percent, to $1,424.50. Copper dropped the most among major commodities. The July contract fell 7.2 cents, or 2.1 percent, to $3.288 a pound.