Stocks ended higher Wednesday, with the Dow extending its gains to post a record high for the second-straight day, amid signs of improvement in the labor market.
The Dow Jones Industrial Average briefly crossed above 14,300 for the first time, led by Bank of America and Hewlett-Packard. Verizon led the blue-chip laggards.
(Read More:What the Pros Are Saying About the Market's Rally)
The S&P 500 eked out a small gain, while the Nasdaq finished slightly lower. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, closed above 13.
Among key S&P sectors, materials ended modestly higher, while telecoms dragged.
"We've climbed a wall of worry—the only thing that's been pushing stocks up is the $85 billion of spending every month from the Fed. Don't fight the Fed!" said Adam Hewison, chief strategist at president of INO, adding that the Dow could extend its gains to 14,600-14,800 as a result. "But if [the Fed] tapers off, stocks will hit south. And the other fly in the ointment is Italy."
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Economic growth continued to show improvement in January and early February as consumer spending picked up, according to the Fed's Beige Book, a region-by-region assessment of the economy. The central bank expects the economy to maintain its gradual recovery, supported by the low interest rates and the ongoing bond-buying program.
"It's reasonable to think that the upside can continue—we're not here because of euphoric sentiment; we're here because we earned it," said Lawrence Creatura, portfolio manager at Federated Investors. "Earnings have increased beyond expectations. And if earnings continue to be strong, then stocks will continue to go up."
Meanwhile, some analysts warned that the rally may be the beginning of a bubble. U.S. shares are up almost 7 percent since the start of the year, European markets have gained about 5 percent, while in Asia, Japanese shares have soared almost 13 percent.
"I think stocks could very well rally through the rest of this year, even into 2014 based on this wave of money, but at some point it will pop and collapse, and that's what investors need to bear in mind," Jim Rickards of Tangent Capital, told CNBC Asia's "Squawk Box".
Dell gained amid news activist investor Carl Icahn has taken a position in the computer hardware maker of nearly 100 million shares, sources told CNBC, which would total his ownership to approximately 6 percent. Meanwhile, Icahn did not provide a comment to CNBC. Meanwhile, Dell holder Southeastern Asset Management has considered a counter-bid for the company, according to a Wall Street Journal report.
(Read More: As Bull Market Turns 4, Traders Thank Bernanke)
Also on the tech front, Apple edged lower, putting a damper on the Nasdaq, after a batch of brokerages turned sour on the iPhone maker, Berenberg cut its rating on the company to "sell" from "buy." Citi lowered its price target to $480 from $500 and Barclays slashed its price objective to $530 from $575. Apple has plunged nearly 20 percent so far in 2013.
Qualcomm declined after Goldman Sachs removed the chipmaker from its "conviction buy" list, saying the chipset market has peaked this year.
Microsoft slumped to lead the Dow laggards after the European Union fined the software giant a hefty $731 million for breaking a pledge to offer PC users a choice of Internet browsers when they install the Windows operating system.
Among earnings, American Eagle Outfitters posted a higher quarterly profit, but shares tumbled after the teen apparel retailer handed in a disappointing current-quarter sales forecast, citing a tough economy.
Staples posted earnings that edged past expectations and also raised its quarterly dividend by one cent, but shares declined to lead the S&P 500 laggards after the office supply retailer reported revenue below estimates and estimates a lower-than-expected full-year forecast, due to weakness in Europe and North America.
Big Lots rallied to lead the S&P 500 gainers after the retailer topped Wall Street earnings and revenue expectations.
PetSmart and Vail Resorts are among notable companies slated to post earnings after the closing bell.
JCPenney slipped after Citi and Openheimer downgraded the retailer to "neutral" from "buy and to "perform" from "outperform," respectively.
On the economic front, private sector employment jumped by 198,000 in February, according to ADP's monthly report. Economists polled by Reuters expected a gain of 170,000. The report comes two days before the Labor Department reports the widely-followed non-farm payroll figures, with economists expecting a gain of 152,000.
"If the employment data is better than expected, and the market fails to sustain a rally, it will be an indication that lots of good news is already priced in and that could exacerbate a downside move," wrote Elliot Spar, market strategist at Stifel Nicolaus.
Meanwhile, factory orders fell 2 percent in January amid weak demand for transportation equipment, according to the Commerce Department, against expectations for a decline of 2.2 percent. Orders gained 1.3 percent, excluding transportation.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter:@JeeYeonParkCNBC)