U.S. stocks trading at historical highs, bubble in sight?

U.S. stocks rose for a third straight day on Wednesday, sending both the Dow Jones Industrial Average and the broader S&P 500 to all-time closing and intraday highs.

Against an anemic U.S. economy, the market's impressive bullish run has prompted investors to wonder if Wall Street is creating another bubble after topping its 2007 level.

Minutes after the opening bell on Wednesday, the S&P 500 index broke through its all-time intraday high of 1,576.09 points set on Oct. 11, 2007, and repeatedly refreshed the new high during the trading day. By the closing bell, the benchmark index moved up 19.12 points, or 1.22 percent, to close at a record 1,587.73 points.

The blue-chip Dow also set new highs, surging 128.78 points, or 0.88 percent, to close at 14,802.24. Meanwhile, the Nasdaq Composite Index jumped to a 12-year high to close at 3,297.25 points.

Stock market bubble in sight?

The market, at this "crazy level," could be a little bubble here, Peter Tuchman, a trader with Quattro M. Securities Inc., told Xinhua.

Joseph Stiglitz, Nobel laureate in economics and professor at Columbia University, listed three factors attributive to the stock market's bullish run during a speech Tuesday at the Asia Society in New York.

First, the Federal Reserve has kept interest rates low for a long time to boost the weak economy. In a near-zero interest rate environment, money is fleeing from bonds to equities, thus creating asset bubbles and part of that is the stock market.

Secondly, "if wages are low, that helps (companies') profits," Stiglitz said.

According to Thomson Reuters data, among the 5 percent of S&P 500 companies that have reported first-quarter earnings so far, almost three-quarters have beaten market expectations.

Thirdly, many U.S. firms, especially those in the Dow's 30 components of large, multinational American industrial firms, are making much of the profits in the emerging markets.

"So when you see profits are high in American firms, it doesn't mean they are doing well necessarily in the United States. They could be making money in one of the boom countries or the countries that are doing well around the world," Stiglitz said.

Incongruity of U.S. economy and stock market

Stiglitz also pointed out the "incongruity" of a languid economy not creating many jobs and a booming stock market. He called that a"manifestation of the disparities in our society and our economy."

Meanwhile, Tuchman said "the U.S. market has disengaged from all the news around the world."

"Even bad news that's going on in the United States seems to be fluffing it off," Tuchman said. "The economy is not necessarily getting better, but the market is."

As the market rallied to as high as it could with almost no real correction at all, investors on the short side eventually "throw in the towel" and make great efforts to cover their shorts, Tuchman said.

Year to date, the Dow was up 12.96 percent, the S&P 500 up 11.33 percent and the Nasdaq up 9.20 percent.

In stark contrast, recently released economic data painted a dim picture of a U.S. economy that is recovering with fits and starts.

Nonfarm payroll edged up 88,000 in March, which marked a nine-month low and was less than half of economists' estimates. That's according to the U.S. Labor Department. The unemployment rate in March was still high at 7.6 percent, barely improved from February's 7.7 percent.

Moreover, the U.S. economy expanded at a languid annual rate of 0.4 percent in the fourth quarter of 2012, the Commerce Department said in its final estimate.

U.S. market, a "safe haven" of world money

"It's a safe haven for money all around the world," Tuchman said of the U.S. market.

He also said that the stock market retracing its high back in 2007represents the strength of the U.S. market and the Fed's asset purchases.

Keith Bliss, senior vice president and director of sales and marketing at Cuttone & Company, echoed that view.

"With the BOJ (Bank of Japan) doing unprecedented money-printing, and Europe probably on the cusp of lowering their interest rates, money will now starts flowing out of those markets into the U.S. market for both safety and yield," Bliss told Xinhua.

"They have to come for some return. The only place you can really get safe returns right now is in the U.S. equity market," Bliss added.

According to the minutes of the Federal Open Market Committee's March meeting released Wednesday, Fed officials showed clear dissension on the duration of the quantitative easing program, but the committee promised that it would continue massive asset purchases "until the outlook for the labor market has improved substantially in a context of price stability."

Most traders feel that it becomes harder to predict the market's next move when the Dow and S&P 500 are trading in uncharted waters. The consensus now, however, is that the market will be at a better place by the end of this year.