updated 7/18/2007 10:32:12 AM ET 2007-07-18T14:32:12

The Dow Jones industrial average swept past 14,000 for the first time Tuesday, eventually closing just below that level, after a relatively tame inflation report gave investors reason to extend an extraordinary — but questionable — Wall Street rally.

The stock market’s best-known indicator crossed 14,000 in the first half-hour of trading and rose as high as 14,021.95, having taken just 57 trading days to make the trip from 13,000.

Stocks have risen fairly steadily since the spring amid a continuum of buyout news and evidence that despite higher fuel prices and the ongoing problems in the housing market and mortgage lending industry, consumers are spending and companies remain optimistic about the future. With the Federal Reserve ever vigilant about inflation, any news that prices are rising at a moderate pace has added to the market’s momentum, as it did Tuesday.

The release of moderately upbeat earnings reports helped reassure a market that had worried that a slowing economy and rising energy prices would slash into corporate profits.

But the Dow’s latest accomplishment does raise questions about whether investors are buying more on speculation than fundamentals. A week ago, the average tumbled nearly 150 points after disappointing forecasts from Home Depot Inc., Sears Holdings Corp. and homebuilder D.R. Horton Inc., but only two days later, the Dow barreled 283 points higher as investors chose to put a positive spin on a generally lackluster series of retail sales reports.

“One of the things we know about the Dow being only 30 stocks is that it is a bit less representative of the entire market, but it is still a sign that large-cap multinationals continue to drive this market,” said Peter Dunay, an investment strategist with New York-based Leeb Capital Management. “For the moment, the momentum and strength is so good. You can’t fight it.”

The Dow closed the day up 21 points, or 0.2 percent, and just below the 14,000 level, while the broader Standard & Poor’s 500-stock index finished the day down a fraction of a point, having set its own record highs in recent sessions. The Nasdaq composite index added 15 points, or 0.6 percent.

Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 5.07 percent from 5.04 percent late Monday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude slipped 16 cents to $73.99 per barrel on the New York Mercantile Exchange, after surpassing $75 per barrel in earlier trading. Oil hasn’t closed above $75 since August. Gas futures fell.

The short time that it took the Dow to pass this its milestone recalls its ascent during the dot-com boom, especially because it took only 129 days to make the passage from 12,000 to 13,000. In the late 1990s, the Dow took just 24 days to go from 10,000 to 11,000, and 89 days to go from 6,000 to 7,000.

The end of the high-tech boom plus the recession and the aftermath of the Sept. 11, 2001, terror attacks helped send all the major market indexes into reverse. It took the Dow 7 1/2 years to trek from 11,000 to 12,000, and only last October began setting its first record highs since January 2000. Since then, the Dow has recorded 52 record closes.

Major Market Indices

The Dow’s run from 13,000 to 14,000 has been led by big-name manufacturers and producers rather than the financial or drug companies that also populate the Dow. Diversified manufacturer 3M Co., construction-equipment maker Caterpillar Inc., aluminum producer Alcoa Inc. and energy company Exxon Mobil Corp. were among the biggest contributors to the Dow’s move, while financial-services company JP Morgan Chase & Co. and Johnson & Johnson were laggards.

The S&P 500 has also surpassed its early 2000 highs, reaching a new closing high last month and last week surpassing its trading high. The Nasdaq, which was inflated by the high-tech boom, is not expected to approach its closing high of 5,048.62 made in 2000 in the foreseeable future.

The move higher Tuesday came as Wall Street sorted through a mixed inflation reading and profit reports from blue chip names including Coca-Cola Co. and Merrill Lynch & Co.

The gains also follow the Labor Department’s report that inflation at the wholesale level fell in June but heated up more than expected when excluding often volatile food and energy prices. The producer price index slipped 0.2 percent in June but the so-called core figure, which takes out food and energy, rose 0.3 percent. But without an increase in cars and light trucks, however, core inflation would have increased a more moderate 0.1 percent.

Rising food and energy costs have in recent months have unnerved some investors who worried that inflation will deplete the ability of many consumers to keep spending and help prop up the economy.

The flurry of news this week could affirm or undermine the confidence that Wall Street has shown in recent sessions. Eleven of the Dow components report quarterly financial results this week.

One piece of economic news perhaps affecting investor sentiment Tuesday was the Federal Reserve report that industrial production — output at the nation’s factories, mines and utilities — rose by 0.5 percent last month after a 0.1 percent drop in May. The gain was in line with expectations and provided evidence that the nation’s factories are ramping up production following sharp cutbacks in the winter.

Among the companies weighing in Tuesday, Coca-Cola saw its second-quarter profit rise 1 percent as sales at the world’s largest beverage maker rose 19 percent. Case volume slipped 2 percent in the company’s key North America market, however. The stock fell 62 cents to $53.23.

Merrill Lynch, the nation’s largest retail brokerage, said stronger investment banking results and fees from stock transactions boosted second-quarter profit 31 percent from a year earlier. Merrill fell 67 cents to $86.72.

In other corporate news, Dutch chemicals company Basell agreed to acquire Lyondell Chemical Co., a U.S. rival, for $12.1 billion in cash. Including debt, the deal’s size totals about $19 billion. Lyondell jumped $6.89, or 17 percent, to $47.01.

A Goldman Sachs upgrade of Dow component American Express Co. helped send the credit card issuer’s stock up 4.6 percent, boosting the index further. Goldman rated the stock a “Buy” and set a $77 price target. American Express jumped $2.96 to $64.84.

State Street Corp., which provides financial services to institutional investors, rose $1.85, or 3 percent, to $72.24 after raising its fiscal 2007 forecast citing benefits from its recently completed acquisition of Investors Financial Services Corp.

In market action abroad, Britain’s FTSE 100 fell 0.58 percent, Germany’s DAX index fell 0.83 percent and France’s CAC-40 fell 0.43 percent. In Asia, Japan’s Nikkei stock average fell 0.12 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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