Dow Closes at Record High, but Falls Short of 14,000

The Dow Jones Industrial Average closed at a record high, but slipped below 14,000 after trading above the milestone earlier in the session. Traders remained optimistic that the market will power higher.

"We're not going to stop at 14,000; it's just an arbitrary number," said Gordon Charlop, president of Walter J. Dowd. "I wouldn't be surprised to see the same kind of move that we have seen in the last three months in the next three months."

It took just 57 trading days for the market to trade from 13,000 to 14,000.  The Dow is now up 12.1% for 2007 and it has closed at a record high 52 times since October 1, 2006.

"If you're not long, you're hurting," Tom Busby, CEO of DTI Partners, told CNBC.com. "This is very bullish and setting us up for a great October. If you look at the worldwide global economy, there's a lot of liquidity out there and that money is chasing these assets."

"It's a cliche to say 14,000 is just a number, but I really think 15,000 is well within reach for the Dow by year end," said David Bianco, chief equity strategist at UBS. "Earnings growth may be slowing, but it's still growing at quite a healthy clip, mostly because of the global economy."

American Express was by far the biggest percentage gainer on the Dow after Goldman Sachs upgraded the company to buy from neutral, saying the stock was undervalued.  Goldman also boosted its price target for American Express to $77.  The upgrade helped to boost the influential financial sector. 

Cyclical stocks were the big winners. S&P 500 sectors in positive territory included materials and industrials. Information technology was higher with heavy trading in Intel ahead of its earnings report due after the bell.  Semiconductor stocks got a boost from Novellus Systems , which reported better-than-expected earnings and an optimistic forecast.  Shares of KLA-Tencor  also rose sharply after its chief operating officer said the company was optimistic about spending on flash memory chips in the second half. Transports hit new highs with railroad shares trading in the green.

"It's momentum buying," Peter Cardillo, chief market economist at Avalon Partners, told CNBC.com. "I think sentiment continues to be positive.  The market is getting comfortable with the idea that, for the most part, earnings will be on target and maybe a little better than expected."

Dow component Coca-Cola said second-quarter profit rose slightly, helped by strength in emerging markets such as China, Turkey, India and Brazil. The world's largest beverage maker posted a 1% rise in quarterly net income on a solid 19% gain in sales. Excluding one-time items, Coca-Cola said it earned 85 cents a share, beating the 82 cents per share expected by analysts surveyed by Thomson Financial. 

Another Dow component, Johnson & Johnson , also beat Wall Street expectations.  The company said second-quarter profit rose, boosted by strong demand in overseas markets.  J&J reported net income of $1.05 a share, more than the $1 a share expected by Wall Street.

Investors are paying particular attention to the financial stocks, especially after concerns about a potential spillover of subprime problems into the broader market.

Merrill Lynch said second-quarter net earnings surged 31% on strong investment banking activity as well as trading credit and interest rate products.  Merrill's subprime mortgage-related activities did not weigh on overall results. The world's largest brokerage easily beat earnings and revenue estimates, saying net earnings were $2.24 a diluted share.  That was better than the $2.02 a share analysts, on average, were expecting, according to Reuters Estimates. The stock erased early gains, however, after Merrill's chief financial officer said in a conference call that the market for subprime collateralized debt has yet to stabilize.

Wells Fargo , the fifth-largest U.S. bank, said second-quarter profit rose 9%, as growth in several fee categories offset a decline in mortgage banking income.  Net income increased to 67 cents a share. That was in line with analysts' expectations.

State Street beat expectations.  The company, which provides financial services to institutional investors, said profit rose 61%, helped by new business from existing and new customers.   Net income for the quarter rose to $1.07 a share, versus the $1.01 a share expected by analysts polled by Thomson Financial.

However, US Bancorp said its second-quarter profit slipped to 65 cents a share, missing analysts' estimates by 2 cents a share. The company said its chief credit officer has resigned.  US Bancorp said the results reflected an "expected increase in credit costs."

Shares of Rohm & Haas hit a historic high after the company approved a $2 billion share repurchase program.  Citigroup upgraded the specialty chemicals and plastics company to buy from neutral on the news.

The Labor Department said the June producer price index (PPI) fell 0.2%.  Inflation at the wholesale level was expected to rise 0.1%, according to economists surveyed by CNBC and Dow Jones. The core PPI, which excludes food and energy prices, rose 0.3%, slightly more than the 0.2% expected by economists.

The National Association of Home Builders sentiment index fell in July to 24, worse than the 27 that was expected.

New York light crude futures traded above $75 a barrel for the first time in 11 months, before pulling back.

European Stocks Close Lower

A couple of disappointing economic reports pushed major European markets into the red.

London's FTSE-100 , the Frankfurt DAX and the Paris CAC-40