"I think we stand a better than even chance," of reaching the high Thursday, Luschini said. But he said the market is still vulnerable to a pullback, and a small correction is probably still in the offing. "It's possible we could have the all-time high and then lose it in the same day."
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The Dow surged 175 points Wednesday to a fresh five-year high. It closed at 14,075, less than 100 points from its all-time closing high of 14,164, hit on October 9, 2007. The Dow's intraday high was 14,198, on October 11, 2007. The S&P 500 Thursday jumped 19 points to 1515, still below its 2013 high and 50 points from its all-time high. The Nasdaq was up 32 at 3162.
Laszlo Birinyi of Birinyi Associates said the market is in a bull trend, and it was more than soothing words from Fed Chairman Ben Bernanke fueling the rally. "You had some good housing numbers. You had a good report from Priceline. You had a good report from Dollar Tree," he said. The market was also focused on the durable goods report, which showed a jump in core capital goods orders of 6.3 percent. Despite a headline drop of 5.2 percent in durables, the core goods orders saw the best increase since March, 2010.
"It was a good day. You also had an upgrade of Google. You rub stocks together and you get fire," Birinyi said. Google was upgraded to buy by Bank of America of America Merrill Lynch, which put a price target of $920 on the stock.
The market was also helped by a positive outcome for Italy's bond auction Wednesday morning. Italy sold 2.5 billion euros of its four-year bonds at a yield of 3.59 and four billion euros of a 10-year at a 4.83 percent yield. Italy's failure to elect a clear majority in the upper house Monday has left the country's leadership in doubt and sparked a turbulent sell off Monday.
Art Cashin, director of floor operations at UBS, said the Italian situation is more complicated than reflected by markets, and the uncertain election outcome could hold back stocks from new highs. Still, the S&P is heading back toward its 2013 high of 1530, and the Dow is back above 14,000.
"The next question is vertigo. We've only been able to close and stay above 14,000 (on the Dow) for one day at a time," this year, Cashin said.
Jack Ablin, CIO with BMO Private Bank, said Italy is a wild card for the market, but for now he sees the stock market supported by the Fed's easy money policy. "I think stocks are fairly priced, but because of this valuation difference between stocks and bonds, we're going to run into this melt up phenomena . We could see stocks run up 10, 12 percent from here, just on issuing cheap debt and buying stocks," he said. Ablin pointed to Dell, which plans to go private, buying its stock with new debt.
Treasurys Wednesday resumed their down trend, after the temporary flight to quality trade that drove the 10-year yield toward 1.8 percent this week. The 10-year late Wednesday was yielding 1.90 percent.
Traders had expected to see the market show more anxiety around the "sequester." The sequester is an automatic regimen of spending cuts set to go into effect Friday if Congress and the White House do not work out a compromise.
Economists see about a half percent hit to GDP from the $85 billion annual cuts, and traders are looking more at the remaining $43 billion that could be cut this fiscal year. The sequester would hit defense disproportionately, with half of the cuts coming from the Pentagon.
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Nevertheless, defense stocks rallied Thursday. "It's kind of sell the news in reverse," said Luschini. "Are they discounting the fact the sequester and al the bluster about is already reflected, or it's not a big deal?"
Ablin said it's actually favorable that the government will cut some spending. "I think the sequester is a net positive," Ablin said. "Just like investors don't like tax increases ,they do like progress when we are doing our part to narrow this fiscal deficit. No one wants to be responsible for cutting anything…I'd rather be approximately right than absolutely wrong and doing nothing would be absolutely wrong."
He said it's one less worry for the market to move past it. "I'm sure we'll have more to worry about. We just don't know what it is yet," he said.
What Else to Watch
There were some high profile earnings misses after the close Wednesday. Groupon plunged 26 percent in after hours trading, and JC Penney fell nearly 15 percent.
On tap Thursday morning, there are several retailers' earnings, including Kohl's, Barnes and Noble, Chico's FAS, and Sears before the bell, and Gap after the bell. Cablevision, Rowan Cos, Western Refining, Ocwen Financial and Toronto Dominion report before the open, and Great Plains Energy, Sothebys, Salesforce.com, Molycorp and Westar Energy report after the bell.