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S&P 500, Dow close higher for new records

Stocks closed out the first quarter on a high note with the S&P 500 piercing through levels last seen in 2007 to end at a record high near 1,570 and the Dow logging its strongest quarter in 15 years.

Read More: After April Showers, Market Could Spring Higher by Year End

The S&P finally surpassed its closing high level of 1,565.15 shortly after the market open after flirting with the milestone for weeks, recovering all its losses from the financial crisis. The next milestone for the index is its all-time intraday high of 1,576.09, set on October 11, 2007.

The Dow Jones Industrial Average soared an impressive 11.25 percent in the first three months of the year to log its best first-quarter performance since 1998. Interestingly, the blue-chip index has never finished a year in negative territory when the first quarter is up at least 8 percent.

Hewlett-Packard was the biggest gainer on the Dow for the quarter, skyrocketing more than 67 percent. Caterpillar and Alcoa were the only two blue-chip stocks to finish in the red.

The S&P 500 surged 10.03 percent, while the Nasdaq jumped 8.21 percent for the quarter, logging their fifth-straight monthly gains. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, ended below 13, plunging approximately 30 percent for the quarter.

All 10 S&P sectors finished higher for the quarter, led by health care and consumer staples, up more than 15 percent and 13 percent, respectively.

Read More: Defensive Sectors Can Be Leaders in a Rising Market

However, volume was relatively low ahead of Good Friday. Markets will be closed in the United States and most of Europe, but banks will be open. Economic data including personal income and consumer sentiment are expected to be reported Friday.

"This market's had a phenomenal run and we've been anticipating a cooling period – we thought that the Cyprus event would have been a perfect opportunity to do so, but we just keep going higher," said Troy Logan, managing director and senior economist at Warren Financial Service. "What's driving that is the fundamental positives."

Logan pointed to the ongoing housing recovery as a positive for the market going forward. Additionally, he noted that the employment picture, while not improving at a robust rate, is seeing gradual progress.

"The U.S. is not showing signs of going into a recession and the Federal Reserve has clearly signaled that they will remain accommodative for the foreseeable future," said Logan. "And that's good for asset prices."

Read More: Rally Like a Broken Record as S&P Scores New High

In Europe, Cypriot banks re-opened after an almost two-week closure to relative calm. Strict capital control measures were imposed and could remain in place for weeks. Cypriots will not be allowed to withdraw more than 300 euros a day, cash checks, or take more than 3,000 euros when traveling abroad.

Meanwhile, rumors swirled that Fitch Ratings will follow fellow ratings agency Moody's lead to cut Italy's sovereign debt rating. Moody's rates Italy two notches above "junk" grade. However, Italian Economy Minister Vittorio Grilli said he was unaware of any upcoming downgrade.

Read More: European Default Has to Happen: Mark Mobius

In company news, Blackberry reported quarterly earnings that outpaced market expectations, boosted in part by the launch of its new BlackBerry 10 smartphone. Still, the company lost subscribers at a rapid pace, with the base of users contracting to 76 million from 79 million. (Read More: Is BlackBerry's Turnaround on Track?)

Pinnacle Foods jumped more than 10 percent in their NYSE debut as the packaged foods maker priced at $20, at the top of their expected range of $18 to $20.

Goldman Sachs ended lower even after Guggenheim started coverage of the banking giant with a "buy" rating and price target of $175. Meanwhile, the brokerage initiated coverage of Morgan Stanley with a "neutral" rating and a price target of $25.

United Technologies rose after Morgan Stanley initiated coverage of the Dow component with an "overweight" rating, saying the company has "significant, broad-based" tailwinds.

On the economic front, the U.S. economy grew at a 0.4 percent annual rate, according to the Commerce Department, just a touch below the 0.5 percent gain expected by economists in a Reuters survey. And weekly jobless claims jumped 16,000 to a seasonally adjusted 357,000, according to the Labor Department.

Meanwhile, the pace of business activity in the Midwest slowed in March, with the Institute for Supply Management-Chicago barometer dipping to 52.4 from 56.8 in February. A reading above 50 indicates expansion in the regional economy.

Treasurys added to losses after the government auctioned $29 billion in 7-year notes at a high yield of 1.248 percent. The bid-to-cover ratio, an indicator of demand, was 2.56.