Dow Finishes at All-Time High, Smashes 2007's Record Cse

Almost four years after the bear-market low, the Dow Jones Industrial Average pierced through levels last seen in 2007 to close at a record high of above 14,200 on Tuesday, boosted by an upbeat ISM non-manufacturing index and amid ongoing monetary support from the Federal Reserve.

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The blue-chip index hit an all-time intraday high of 14,286.37, spiking above its previous all-time high of 14,198.10 from October 2007. So far, the index is up nearly 9 percent in 2013, surpassing the 7.3 percent gain for all of 2012.

"The real risk to this market is to the downside because when [the market] turns, it's going to turn hard and fast," said Gordon Charlop, trader at Rosenblatt Securities. "We've gotten up this high too quickly and it would be healthy if we had some sort of retracement now."

(Take Our Poll: Will the Dow Hit 15,000 This Year?)

S&P 500

The Dow Jones Industrial Average soared 125.95 points, or 0.89 percent, to end at 14,253.77, led by Boeing and United Technologies. The Dow Jones Transportation Average also touched a record high.

Since the Dow's last all-time high in 2007, Home Depot and IBM have been the biggest gainers, while Alcoa and Bank of America have been the worst performers.

(Read More: Banks Left Behind in Dow's Record Rally)

The S&P 500 rallied 14.59 points, or 0.96 percent, to end at 1,539.79, posting a fresh five-year high. The Nasdaq jumped 42.10 points, or 1.32 percent, to close at 3,224.13, its highest level since November 2000.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell below 14.

All key S&P sectors ended in positive territory, led by techs and industrials.

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"The Wizard of the Fed, Ben [Bernanke], has done a great job propping up the market, but the question is how does the wizard move the pin from the balloon without blowing the whole thing up?" said Charlop. "This is getting out of balance and he's got to figure out a way to justify the levels that we've gotten to and draw back on some of the stimulus."

(Read More: What Pros Are Eyeing After Dow's High)

On the economic front, the services sector expanded in February, according to the Institute for Supply Management's non-manufacturing index. which rose to 56.0, exceeding expectations for 55.0. A reading above 50 indicates a sector expansion.

European shares were boosted by the news that euro zone finance ministers have struck an agreement to bail out Cyprus by the end of March, although they have yet to work out the details of the 17 billion euro ($22.1 billion) financial aid package.

Shares in mainland China rallied 2 percent as outgoing Chinese Premier Wen Jiabao set out a reform plan at the National People's Congress in order to achieve a 2013 growth target of 7.5 percent. The Shanghai Composite tumbled to its lowest level in six weeks on Monday after the Chinese cabinet announced harsher-than-expected property curbs in China.

(Read More: Why China's Property Market Is Getting Scary)

Qualcomm rose after the chipmaker said it is raising its quarterly dividend by 40 percent to 35 cents a share from 25 cents a share and announced a $5 billion stock buyback program.

Google climbed to hit another all-time high after Jefferies boosted its price target on the search-engine giant to $1000 from $875 with a "buy" rating.

Netflix gained after RBC initiated coverage of the movie-streaming website with an "outperform" rating and a price target of $210.

(Read More: Big Changes in in Tech Since Last Dow Record)

JCPenney slumped to lead the S&P 500 laggards amid news Vornado Realty Trust is selling 10 million of the retailer's shares via Deutsche Bank, sources told CNBC. Vornado currently has an approximately 8.5 percent stake in the retailer, or about 18.6 million shares.

The Senate Budget Committee is expected meet to discuss reducing the fiscal deficit by eliminating wasteful spending in the tax code.

House Speaker John Boehner said President Barack Obama and he had made no headway on a deal to avoid sequestration over the weekend. Meanwhile, House Republicans are expected to introduce a bill to extend government funding through September, to avoid a government shutdown at the end of the month.

While stocks so far have largely ignored sequester concerns, analysts say signs the cuts are beginning to impact the economy could eventually move markets.

Stephen King, chief global economist at HSBC, said that the U.S. was living in a fantasy world" over the impact sequestration would have on growth.

"If you look at the projections from the Congressional Budget Office, they assume that growth goes back to between four to five percent in real terms between 2014 and 2018. Their numbers suggest that the U.S. will post the fastest rate of productivity growth of any decade in the last 50 or 60 years," King told CNBC Europe. "Even allowing for the fact that there's some debt reduction, coming through sequestration, there's still a degree of wishful thinking with regard to the economy which probably isn't going to come true." (CNBC Explains: What Is Sequestration?)

VeriFone is scheduled to report fourth quarter earnings after the closing bell.

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up This Week:

WEDNESDAY: Weekly mortgage apps, ADP employment report, factory orders, oil inventories, Fed's Beige Book, Fed's Fisher speaks, Disney shareholders mtg, ExxonMobil shareholders mtg; Earnings from Staples, American Eagle Outfitters, Big Lots, PetSmart
THURSDAY: Bank of England announcement, Challenger job-cut report, ECB announcement, international trade, jobless claims, productivity & costs, quarterly services survey, natural gas inventories, consumer credit, Fed balance sheet/money supply, chain-store sales, Green Mountain shareholders mtg, weekly rail numbers; Earnings from Kroger, Smithfield Foods, H&R Block, Pandora
FRIDAY: McDonald's sales, non-farm payrolls, wholesale trade; Earnings from Ann, Foot Locker

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