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Dow Sets New Record Close; Bulls Shrug Off Weak Data

The Dow Jones Industrials closed at another record high and other indexes climbed as positive momentum on Wall Street trumped a weak manufacturing report.

Volume was light but buying was across the board with eight of the 10 S&P 500 sectors trading higher. The Dow has been up 1.7% over the last three days, the biggest gain since August. The NYSE Composite traded at an all-time high. The S&P 500 traded at its highest level since September 2000.

"By our count, this is the fourth longest duration rally since 1900," Jeffrey Saut, Chief Investment Strategist at Raymond James, told CNBC.com. "The markets are floating on a sea of liquidity, but the real driver of this market is the increasing risk appetite of investors. When you combine liquidity with increasing risk tolerance, stocks are levitating."

Stocks temporarily slid off highs at midday after U.S. Mid-Atlantic manufacturing data came in much weaker than expected. The Philadelphia Fed Business Index for February was 0.6, well below the 5.0 expected by economists polled by Reuters.

"We believe the floor of the market has moved up and we would be very surprised to see deep penetration below where we are now," Frederic Dickson, Chief Market Strategist at D.A. Davidson, told CNBC.com. "We are going into a period of little bit of excitement with more inflation data in the form of the PPI and the CPI coming. I think this a little posturing before that economic data."

Consumer staples was the best performing S&P 500 sector. Energy was the worst performer, dragged down by declining oil prices. Caterpillarwas the best performer on the Dow. Advancing shares edged out decliners on the New York Stock Exchange.

Other data traders were watching today included January import prices, which dropped by 1.2%, a larger amount than expected. Manufacturing activity in New York rebounded in February. The Empire State Manufacturing Index was 24.4, much better than economists were expecting.

However, investors were suprised negatively by last week's jobless claims numbers. The Labor Department said claims rose by 44,000 to 357,000, a 17-month high. Economists also saw an unexpected decline in January industrial output.

Treasury prices rose on the 10-year note, sending yields lower. The 30-year bond price was unchanged.

Fed Chairman Ben Bernanke gave an encore performance of his semi-annual Congressional testimony, appearing before the House Financial Services Committee. Bernake's testimony before the Senate Banking Committee Wednesday, stating that inflation pressures are beginning to diminish, spurred a buying spree in stocks.

Bernanke today reminded financial markets that the Fed's anti-inflation vigil continues, even though economic growth is slowing.

"There's a lot of momentum right now," Liz Ann Sonders, Chief Investment Strategist, at Charles Schwab told CNBC.com. "I think some of that is a function of what Fed Chairman Bernanke did not say. He didn't raise any warning flags."

"Bernanke's saying we're on the right course and that tells me they're not changing for many months to come," Arthur Cashin, UBS Director of Floor Operations, told CNBC. "I think the market can live with the status quo for now. As the markets go on, we may need a little more fuel for this fire to keep the lights burning."

The Dow received a boost from component Caterpillar after the maker of heavy construction and mining equipment said it expects to buy back $7.5 billion of shares over the next five years.

Boeing also helped the Dow after the aircraft manufacturer confirmed an order for 27 Boeing 767-300 Freighters from UPS. Boeing hit an all-time high.

Shares of JetBlue were higher despite bad publicity connected with long, weather-related flight delays at JFK International Airport. Goldman Sachs raised its rating on the company to buy from neutral, citing expectations of margin growth ahead that could outpace the rate at most other carriers in 2007.

U.S.Bancorp rose after Warren Buffett's Berkshire Hathaway revealed in a regulatory filing that it had bought more than 23 million shares of the bank last year.

Shares of DaimlerChrysler continued to rise after the company on Wednesday raised the possibility that it could sell its ailing Chrysler unit. General Motors declined to comment on reports that it is in negotiations with DaimlerChrysler on the sale of the unit.

New York light crude futures dropped a penny to just under $58 a barrel after oil fell yesterday on a less-than-expected drawdown in distillate fuel supplies, which include home heating oil. The EIA said natural gas stocks declined 259 billion cubic feet last week, which was basically in line with expectations.

Europe Closes Mixed

In Zurich, the SMI surged more than 10% immediately after the start of trading but then flatened out to around -0.4%. Credit Suisse posted a fourth-quarter profit boost, which was lifted by rising trading revenues. The company has also announced Brady Dougan, who is head of Credit Suisse's investment bank, will be its new CEO.

Also in Switzerland, Zurich Financial beat expectations with 41% full-year net profit increase and announced a $1 billion share buyback program.

In Paris, the CAC-40 was lower, despite strong results from BNP Paribas. The company reported a 28.8% rise in fourth-quarter net profit that beat the average forecast from analysts. Shares lost 3.3%, which was the biggest loss for of the 40 companies included in the benchmark index.

In London, the FTSE-100 finished higher. Diageo, the world's biggest alcoholic drinks group, posted a boost in half-year earnings despite some tough markets and a weakening dollar hurting profit.

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