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Stocks close higher on belief Fed stimulus will continue 

Stocks closed higher on Tuesday, with the S&P 500 hitting a new high above 1,750, after the tepid September jobs report gave further evidence to investors that the Federal Reserve will continue to support the economy at the current pace.

"We are 100 percent allocated to the markets, but we are watching the risks very carefully," said Lance Roberts, CEO of STA Wealth Management. "If this market begins to correct and break any technical support levels, we'll be getting out and reducing out exposure—we have a very itchy trigger finger at this point."

Stocks initially rallied sharply at the open before losing steam around 10:30 am ET, dragged by the Nasdaq as high-momentum names quickly reversed their gains. Major averages resumed their gains in the final hour of trading.

The Dow Jones Industrial Average finished 75 points ahead, lifted by Disney and P&G, earlier touching a one-month high. The Dow is trading within 1.5 percent of its all-time record set last month.

The S&P 500 closed up 10 points, well above 1,750 for the first time, while the Nasdaq hit a fresh 13-year high of 3,929. The S&P 500 and Nasdaq logged a five-day rally. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, finished above 13.

Most key S&P sectors ended higher, led by materials and consumer staples.

Apple stock toggled in and out of negative territory in volatile trading after the tech giant unveiled new versions of its full-sized iPad, called iPad Air, and iPad Mini in time for the holiday season. The tech giant also said a new version of its computer operating system, OS X Mavericks, would be available for existing customers to download free immediately.

Netflix shares closed 9 points down after initially spiking nearly 9 percent at the open. On Monday, the online video company posted blowout earnings after the market close. At least 10 brokerages boosted their price targets on the firm. The stock has almost quadrupled since the beginning of the year.

Meanwhile, Netflix CEO Reed Hastings commented that the company's stock is caught in some "investor-fueled euphoria."

"When it bounced up this morning, it [was up] over 300 percent year-to-date and that's a stock that begs to be sold," said Dan Fitzpatrick, president of Stockmarketmentor.com. "The weekly chart shows the stock extended 61 percent above the 200-day moving average...It was a typical 'buy the anticipation, sell the event.' And if you think about it from a trading standpoint, it gapped up so much this morning, why wouldn't you take those profits? We have a situation where a rising tide lifts all boats, but when that tide stops rising, you're going to see a real pullback as well. Nothing wrong with Netflix."

On the economic front, U.S. employers added just 148,000 workers in September, according to the Labor Department, missing expectations for a gain of 180,000 new jobs. Still, the unemployment rate dropping to 7.2 percent, the lowest level since November 2008.

The report, originally scheduled for release on Oct. 4, was delayed due to the government shutdown. Most market-watchers now expect the central bank to continue its $85 billion a month bond-buying program until well into 2014.

On Monday, Chicago Fed President Charles Evans, one of the more dovish members of the Federal Reserve's Open Market Committee, had said the central bank was likely to delay tapering off its asset purchases for several months, awaiting "a couple of good labor reports and evidence of increasing GDP growth."

"The Fed will be in no rush to engage in tapering this year," wrote Tanweer Akram, senior economist at ING Investment Management. "As a result, 10-year Treasury yields are likely to stay confined in a range of 2.2 percent to 3.2 percent rest of the year."

Meanwhile, construction spending climbed 0.6 percent to an annual rate of $915.1 billion in August, hitting a 4-1/2 year high, according to the Commerce Department. The report was originally scheduled for release on Oct. 1 but was postponed by the shutdown.