The S&P 500 reached a new high-water mark—its second record close this year—setting the stage for further gains, as traders look ahead to next week's jobs report.
After struggling all week to break above its previous closing high, the S&P 500 closed at 1,854, up 9 points. The S&P's all-time intraday high of 1,858 was hit Monday, and that's the next level traders are watching.
Jim Paulsen, chief investment strategist at Wells Capital Management, expects the market to continue to make new highs this year but then to reverse course and end close to where it is now.
"One of the reasons the market continues to do better than people think—even in the face of bad reports that we're looking past because of the weather—is that the market is sensing there's something more going on in the economy," he said. "I still think we're going to have a growth rate of 3.5 percent this year, and that's what's being picked up by the market here."
The market could get concerned if there is a bad jobs report next week. The February jobs report is released Friday and follows two very soft reports. Fed Chair Janet Yellen has said the weather could be a factor, and the market is hyperfocused on the number because the Fed watches it.
In her testimony before Congress on Thursday, Yellen re-emphasized that the central bank has a high bar for altering its plans to taper its bond-buying.
(Read more: Yellen says cold weather may have impacted economy)
But not everyone is so optimistic that only weather is slowing the economy. Bond yields have moved lower on the idea that a string of weak data is not all about weather effect, particularly in housing.
Durable goods data was better than expected Thursday, with orders—excluding transportation—up 1.1 percent, the largest increase since May, after December's drop of 1.9 percent.
As stocks moved higher Thursday, Treasury yields moved lower, in part a reaction to events in Ukraine. The 10-year was yielding 2.64 percent late in the day, its lowest level since early February.
"What does the bond market know?" said Scott Redler of T3Live.com. "There's a slower economy coming? That's particularly good for bonds, so why is the stock market going up?"
He added, however, that there's a lot of liquidity and he expects the stock market to continue to rise.
(Read more: 'New Paranormal' and why black swans are circling)
"It has been five days of holding above 1,840, and now you have a close over 1,850," Redler said. "The door's open for 1,900, 1,925. We absorbed the news out of Russia. We absorbed the bad numbers. If weather starts to thaw and we get good numbers … that's when the market might extend."
Sector rotation could help drive the market higher, according to Redler.
"You have home builders at highs; you have Nasdaq at highs," he said. "The great rotation wasn't from stocks to bonds. It was really from sector to sector, and until that stops we should grind higher."
The best-performing sector Thursday was telecom, up 1.7 percent, which also happen to be the worst performer of the year, down 4.9 percent. Utilities, the best-performing sector year to date, up 5.1 percent, was the worst performer Thursday, down 0.3 percent. Traders are watching if financials can take more of a leadership role, a group that was up 0.8 percent Thursday and is up 2.4 percent since the start of February.
(Read more: Retail's double helix: Sales and margin)
Paulsen approaches 2014 as a barbell, since he thinks stocks will decline after strong gains. He favors commodities-driven materials stocks and utilities, but for different reasons: Utilities are viewed as a defensive sector that investors buy for yield, and the materials sector responds to stronger economic growth. That sector turned positive on the year just this week.
"Commodity prices are going up, and nobody's focusing on it," he said.
What to watch
The second read on fourth-quarter GDP is reported at 8:30 a.m. ET. It is expected to drop to 2.4 percent from 3.2 percent. Chicago PMI is slated for 9:45 ET, and consumer sentiment is released at 9:55 a.m. Pending home sales are forecast to show a gain of 1.6 percent when released at 10 a.m., compared with a drop of 8.7 percent.
Traders will continue to watch events in the Ukraine. Ousted President Viktor Yanukovych plans to hold a news conference in southern Russia at 8 a.m. ET.
Dallas Fed President Richard Fisher speaks in Zurich on U.S. monetary policy at 5 a.m. ET .
—By CNBC's Patti Domm. Follow her on Twitter @pattidomm.