--Stocks rise, pushing Dow industrials to all-time high

--Data show service-sector activity expanding at faster pace

--Upbeat European data boosts markets there

By Matt Jarzemsky

The Dow Jones Industrial Average surged to its highest level ever, finally overcoming the losses tied to the financial crisis on the back of a tenacious stock rally that began in March 2009.

"It really does represent an achievement that we have climbed out of this crater," said Jack Ablin, chief investment officer at Chicago'sBMO Private Bank, which manages about $66 billion.

The Dow rose 127 points, or 0.9%, to 14255 in late-afternoon trading, after notching an all-time intraday high earlier in the session. The benchmark was on pace to exceed its record closing level, October 2007's 14164.53, after more than doubling from its 2009 low of 6547.05.

The Standard & Poor's 500-stock index rose 15 points, or 1%, to 1540. The Nasdaq Composite Index added 38 points, or 1.2%, to 3220.

Nearly four years into the recovery from the longest recession since the Great Depression, stocks are riding expanding U.S. factory activity, higher spending by U.S. businesses and consumers and a recovering housing market to new highs. Service-sector data released Tuesday added to the picture of an improving economy.

Meanwhile, the Federal Reserve and other central banks have juiced equities by driving down yields in safe-haven assets. Bulls also note the Dow's valuation, which at a price-to-earnings ratio of 14 is 20% cheaper than in late 2007.

Skeptics point to a slowing earnings outlook and potential tax and spending headwinds as lawmakers sort out the U.S.'s debt troubles.

At the 2009 lows, "there was just this amazing fear of losing money, just this fear in people's eyes," said Erik Davidson, deputy chief investment officer at Wells Fargo Private Bank, which oversees about $170 billion in assets. But things have changed since, he said. "Between fear and greed, there's a stutter-step emotion-regret. That's what people are feeling now. They're kicking themselves for getting so scared."

Traders on the New York Stock Exchange trading floor described the session as fairly typical. Some stepped back from their computer monitors to reminisce about 2007, when they said the mood was more electric as the blue chips hit new highs. They said the sluggish pace of economic recovery-and a sharply lower level of activity on the stock-exchange floor-made celebrations harder to come by these days.

"There's definitely more caution in the air this time," said Mark Otto, a Knight Capital Group director based on the floor of the New York Stock Exchange. Still, he said, "the momentum is to the upside."

On the economic front, the nonmanufacturing sector expanded at a faster pace in February than a month earlier, bucking economists' forecasts for it to slow, according to the Institute for Supply Management.

"It's a good fundamental signal, on top of a good manufacturing reading that we had on Friday," said Doug Cote, chief market strategist at ING Investment Management, which oversees $179 billion in assets. "This market has really been hanging on central-bank stimulus from around the world, and it is encouraging to see some true fundamentals come out strong."

European markets were broadly higher, with the Stoxx Europe 600 up 1.8% to its highest close since June 2008. Euro- zone retail sales rose more than expected in January, according to Eurostat. Markit's February composite purchasing managers index for the region was revised higher.

Asian markets bounced from the previous session's sharp declines. China's Shanghai Composite, which tumbled 3.7% on Monday after the introduction of new measures to cool the country's property market, climbed 2.3%. Departing Premier Wen Jiabao helped reassure investors as he kicked off the annual session of the National People's Congress by announcing an economic growth target of 7.5% for 2013, as expected.

Elsewhere, Australia's S&P ASX 200 gained 1.3% after stronger-than-expected retail-sales data and Japan's Nikkei Stock Average added 0.3% to close at a fresh 4 1/2-year high.

Front-month April crude-oil futures added 0.8% to settle at $90.82 a barrel, while March gold futures advanced 0.2% to settle at $1,574.60 an ounce. The dollar eased slightly against both the euro and the yen. The 10-year Treasury note fell in price to yield 1.894%.

Among single stocks, American Express added 2.1%, leading gains across 27 of the 30 Dow stocks. The credit-card company was one of nine in the Dow whose shares logged a 52-week high Tuesday. Others included Johnson & Johnson, Pfizer and 3M.

J.C. Penney tumbled 8.7%, the biggest decline among S&P 500 components, after commercial landlord Vornado Realty Trust moved to sell 10 million shares, or more than 40% of its holdings in the department-store chain.

Ascena Retail Group climbed 14% after the operator of Dressbarn, Justice and Maurices stores reported a smaller-than- expected decline in earnings.

Qualcomm gained 1.8% after the semiconductor maker raised its dividend by 40% and announced a $5 billion stock repurchase program.

Impax Laboratories slid 26% after saying Food and Drug Administration inspectors have found continuing problems at its Hayward, Calif., manufacturing facility that may affect new and pending drug applications.

Santarus surged 12% after the biopharmaceutical company reported fourth-quarter earnings and revenue that topped analyst expectations and affirmed its 2013 outlook.

Williams Partners fell 3.2% after the natural-gas transportation company announced an equity sale.

Professional Diversity Network fell 3.8% after the professional-networking website operator's initial public offering on the Nasdaq Stock Market.

-Alexandra Scaggs contributed to this article.

Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com

  (END) Dow Jones Newswires
  03-05-131601ET
  Copyright (c) 2013 Dow Jones & Company, Inc.