A growing sense of optimism about the U.S. economy pushed stocks to record levels Tuesday, even as the market's fear gauge flashed red.
The Dow Jones industrial average and the S&P 500 both closed at new record highs, while the Nasdaq gained 0.7%.
There was no specific catalyst for the advance, but traders said bullish comments from a top hedge fund manager helped.
David Tepper, founder of Appaloosa Management, told CNBC that investors should not be concerned about the Federal Reserve winding down its bond-buying program too soon. Investors who bet against stocks "better have a shovel to get themselves out of the grave," he said.
The Fed has been a hot topic this week after the Wall Street Journal reported over the weekend that the central bank was considering an exit strategy. Stocks have gained between 16% and 17% so far this year, driven largely by the Fed's easy money policies.
Investors have also been encouraged by continued signs of improvement in the U.S. economy, said Paul Zemsky, market strategist at ING Investment Management, pointing to a report Tuesday on small business confidence.
"We keep getting bits of slightly better news that tells you the economy is OK," said Zemsky. "It's not going gangbusters, but it's not falling off a cliff."
......................................................................
:0008 :00hour
