Dow ends above 16,000 for first time as stocks jump

NEW YORK (MarketWatch) — U.S. stocks rallied on Thursday, boosted by better-than-expected data on weekly jobless claims and as investors reconsidered their concerns about the Federal Reserve's potential reduction in its bond-buying program.

"The market is becoming more and more comfortable with the tapering talk," said Andrew Zimmerman, chief investment strategist at DT Investment Partners, in a phone interview on Thursday.

Click to Play Traders are watching Green Mountain Coffee

Emma Moody takes a look at which stocks traders will be watching during market action, including Green Mountain Coffee Roasters, Williams-Sonoma, and Abercrombie & Fitch. Photo: Green Mountain Coffee Roasters.

The S&P 500 (SPX)  was last up 12 points, or 0.7%, to 1,793, while the Dow Jones Industrial Average (DJIA)  advanced 92 points, or 0.6%, to 15,993 after briefly topping the milestone level of 16,000 intraday.

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The Nasdaq Composite (COMP) gained 37 points, or 0.9%, to 3,958.

On Wednesday, stocks slumped after minutes from the last Fed meeting showed the central bank was on track to slow its bond-buying program that has helped power stocks to record levels.

But the main indexes have now recouped their losses and then some. Andrew Wilkinson, chief economic strategist at Miller Tabak & Co., pointed out in a note Thursday that "any reduction in the flow of purchases by the Fed inherently smacks of economic recovery."

The market is also taking in weaker-than-expected manufacturing data and speeches by Federal Reserve officials. The S&P 500 and Nasdaq also are near their own milestone levels of 1,800 and 4,000, respectively. Check out MarketWatch's live blog of Thursday's stock-market action.

Today's market-moving news: The Labor Department said weekly jobless claims fell by 21,000 to 323,000, better than forecasts for 334,000. In addition, wholesale prices dropped 0.2% last month, reflecting the lack of inflationary pressure in the U.S. economy. On the downside, the Philadelphia Fed's index of manufacturing conditions dropped to 6.5 in November, well below expectations, but the market showed little reaction to that report. Among Thursday's Fed speeches, Richmond Fed President Jeffrey Lacker reiterated his opposition to the central bank's bond buys.

What strategists are saying: While uber bear Marc Faber sees asset bubbles just about everywhere, bubble talk could be a good contrarian indicator, according to DT's Zimmerman. "I don't think sentiment is really that bullish out there, if everybody thinks we're in a bubble and is looking for a correction," Zimmerman told MarketWatch on Thursday. "To us it's a contrarian indicator, because we think stocks will continue to rally." Meanwhile, Peter Garnry, head of equity strategy at Saxo Bank, suggested that traders have a fear of missing out in a rally that has left the S&P 500 up by about 25% for the year. He said in emailed comments that a "sense is spreading that if you are not on the bandwagon, your performance will look bad."

2014 predictions: Goldman Sachs sees a 67% probability of the S&P 500 falling 10% at some point in 2014. Meanwhile, Schaeffer's Investment Research pointed out that since 1991, the S&P has always gained in the year that came after a 20%-plus move for that benchmark index.

Today's movers & shakers: Retailers have dropped in the wake of disappointing quarterly results or outlooks. Target Corp. (TGT)  was down 4% after posting weaker margins and earnings at its U.S. business, while Dollar Tree Inc. (DLTR)  dropped 4% after its earnings fell in the third quarter. Read more in the Movers & Shakers column.

Other markets: European stocks were mostly lower, while Chinese manufacturing activity showed a deceleration, which hit Hong Kong stocks. Gold prices extended losses on Thursday, while oil prices jumped above $95 a barrel. The dollar was little changed, but Treasury prices advanced.