Dow tops 10,000 as stocks soar

Stocks soared Wednesday, pushing Wall Street's two best-known indexes above key watermarks, as investors raised their bets on an economic recovery next year.

For the first time in at least three months, the Dow Jones industrial average leaped above 10,000 and the technology-dominated Nasdaq composite topped 2,000, as the rally that began shortly after the Sept. 11 terrorist attacks lured more investors back into the market.

"What this market is telling you is that economic recovery next year is an absolute certainty," said Henry Cavanna, senior U.S. equity portfolio manager at JPMorgan Fleming Asset Management. "Investors are throwing caution to the wind and (anticipating) a very positive outcome."

The Dow rocketed 220.45 points, or 2.2 percent, to 10,114.29, while NASDAQ jumped 83.74 points, or 4.3 percent, to 2,046.84.

Though the milestones are more psychological than anything else, and both indexes remain well below their peaks of early-2000, Wednesday's gains added weight to the belief that the worst "bear" market in 30 years has ended.

Yet, some analysts warn that stocks already may be reaching frothy levels based on expected 2002 corporate earnings.

Wednesday's surge was powered by more upbeat reports on the economy and from key technology companies. A widely watched index of activity in the services sector of the economy showed that growth resumed in November, adding fuel to the idea that the recession that began in spring has run its course, or will soon.

Wall Street's bulls say that has been the singular message of the stock market's rebound since Sept. 21, when share prices hit three-year lows in the sell-off that followed the Sept. 11 terrorist attacks.

The market's gains have stunned many investors, in part because prices were rising even before the success of U.S.-led forces in routing the Taliban in Afghanistan.

But that has been the historical pattern, analysts note: Stock prices anticipate turns in the economy, rather than look backward.

Many experts concede, however, that investors' mood has been helped by the fact that no other terrorist strikes other than the anthrax mail attacks.

Just as important, the Federal Reserve has slashed interest rates to 40-year lows since mid-September. The central bank is expected to cut its key short-term rate, now 2 percent, again next week.

The effect of those cuts has helped the stock market win by default, some analysts say: Investors face paltry yields on money-market accounts and other alternatives to stocks. Now, the market's continuing rally could help feed an economic pickup by boosting the "wealth effect" -- making investors feel richer and thus more willing to spend money, as they see their retirement accounts and other stock investments rebound.