Dow hits record high

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NEW YORK (CNNMoney) — The Dow Jones industrial average rallied to a new record high Tuesday.

The Dow was more than 150 points higher at one point to 14,286.37. That tops both the Dow’s intraday and closing records that were set in October 2007. The S&P 500 added 16 points, and is trading at its highest level since October 2007. It is now only about 1.5% away from its its record closing high — also set in October 2007.

“We’re back to the highest levels in history, but we’ve got more things going for the economy and the market than we did last time,” said Art Hogan, managing director at Lazard Capital.

Back in 2007, the economy was on the verge of winding down and heading into a tailspin, said Hogan, whereas now it’s continuing to improve, albeit slowly.

Stocks are also cheaper now. They were trading at 17 times earnings estimates in 2007. Currently, stocks are valued at about 14 times earnings estimates for 2013.

Plus, both consumers and businesses have more cash and less debt, said Hogan.

Still, not all stocks are at record highs. The Nasdaq, which rose more than 35 points Monday , is nearly 40% below its all-time highs that were set in March 2000, prior to the collapse of the dotcom bubble. The Nasdaq is trading at its highest level since November 2000 though.

While Hogan expects stocks will continue to head higher, there are likely to be some bumps in the road along the way.

It’s possible that investors will take a break from buying, said Hogan, adding that with the Dow up 9% year-to-date, it wouldn’t be abnormal to see stocks move sideways or fall slightly.

Plus, concerns over Europe, particularly the Italian elections, and the ongoing budget drama in Washington, could serve as a catalyst for brief slide.

But a pullback could be healthy and short-lived. Hogan noted that recent moves downward have been met with more buyers.

“There’s a lot of money on the sidelines waiting to get involved in the market, but those investors feel like after the recent move up, they need a pullback before they get in,” he said.

To that end, individual investors have put just $21 billion to U.S. stock mutual funds this year, a relatively small amount given that they pulled more than $500 billion out from stock funds since the financial crisis.

Moreover, as long as central banks around the world continue to support the global economy and financial markets, the bull run that began when the market bottomed in March 2009 is likely to keep going, said Hogan.

“Supportive monetary policy is going to be with us for a while,” he said. “Central banks, including the Federal Reserve, have made it clear that they won’t tighten their policies until economies are self-sustaining, with higher employment and low inflation.”

Later this week, central banks in Europe, Japan and the U.K. are scheduled to meet. All of them are expected to give more promises of support the for world’s major economies.

On the economic front Tuesday, the Institute for Supply Management’s monthly index on service sector business activity rose to 56 in February, a slight improvement from 55.2 the prior month. Economists were forecasting a reading of 55.4.

In corporate news, JC Penney’s shares tumbled, as the struggling retailer is in the third week of a court battle with Macy’s claims that Martha Stewart Living Omnimedia violated a previous agreement with Macy’s in entering into a new partnership with J.C. Penney.

Genworth Financial Inc shares rose on rumors that the company is planning a sale.

Apple, which hit a new 52-week low on Monday. enjoyed a bounce with the broader market. Shares rose more than 3% Tuesday, but the stock is still down nearly 20% this year. Meanwhile, Google continues to hit new highs.

After the market close, gun maker Smith & Wesson Holding Co is expected to report strong quarterly results. Gun sales have surged in recent months amid speculation about new gun control laws.

European markets ended higher, while Asian markets also ended with gains after Chinese Premier Wen Jiabao announced the government will carry a larger deficit in 2013 to help the world’s No. 2 economy reach its goal of 7.5% growth this year.

The dollar rose against the euro and the British pound but slipped versus Japanese yen.

Oil and gold prices edged higher.

The price on the 10-year Treasury declined, pushing the yield up to 1.90% from 1.88% late Monday.