Market Outlook: Stock Rally Expected to Keep Going

It only took six months for the Dow Jones Industrial Average to rise 1,000 points to a record 13,000. But the way market pros were talking on Wednesday, it may take even less time for the blue-chip average to reach 14,000.

CNBC's Jim Cramer, for one, predicted another 1,000-point rise in the Dow "by the end of the summer--and that's a conservative estimate."

“These stocks can’t handle these levels---they’re going higher,” he said on CNBC's "Street Signs." Cramer also reiterated his January prediction that the Dow would reach 14,458 by year-end--and that, too, “is now regarded as conservative,” he said.

Most others interviewed on CNBC Wednesday agreed that stocks are headed higher.

“In general, we believe the market is still undervalued based on current P/E ratios, interest rates, the spread between dividend yields and interest rates,” said Rod Kiddoo, chief investment officer at Cozad Asset Management. “We feel there is still some move to the upside available for investors.”

Momentum Looking Good

Alec Young, equity market strategist for Standard & Poor’s, agreed that "the momentum in the market is looking really good.”

“We know earnings growth is slowing a little bit from the pace of the last few years," Young  said on CNBC's "Closing Bell." "But nevertheless the market was priced for 3% earnings growth this quarter. We’re coming in at double that rate.”

Unexpected strength in the economy is one reason for the market's gains, Young said.

“The market definitely priced in one big theme earlier in the year, and that was a slowing economy,” Young said. “So today’s news on durable goods coming in well ahead of expectations was a positive surprise. But even when we get bad news on the housing front like we did (Tuesday), the market is able to look through it.”

Cozad's Kiddo said the current turmoil in the sub-prime mortgage sector has been overblown because the key issue is employment, which remains strong.

“I’m old enough to have lived through the savings and loan debacle of the early 1980s and interest rates at 15%,” Kiddoo said. “The economy continued to hum along well, and following 1982, we have the best bull run we’ve ever had in the stock market which followed a serious housing (downturn). (The current) housing situation isn’t anything like that. We’ve had a downturn following the greatest boom in housing, and I think it’s a little oversold in how it affects the market.”

Reasonable Valuations

John Burns, founder of Burns Advisory Group, said the market’s rise reflects more than just major companies with strong international sales benefiting from the weak dollar.

“We see very reasonable valuations just from a few years ago,” Burns said. “GDP is 35% to 40% higher than it was at the beginning of the decade and valuations just look fabulous. There is a bright future for investors.”

Of course, not everyone is so bullish.

Sam Stovall, Chief Investment Strategist at Standard & Poor's, doesn't see that much significance in Dow 13,000.

"The fundamentals haven't changed all that much," Stovall said on "Closing Bell. He warned that the market may "rushing ahead on hot blood."

Still, Kevin Cronin, chief investment officer at Putnam Investments, called Dow 13,000 "an important psychological level." And even after breaking that barrier, "we think the market has continued upside," he said.

© 2009 CNBC.com