S&P cracks 1,400 for first time since 2008; Dow rally continues

NEW YORK -- Stocks have been surpassing old milestones and generating gains a lot more quickly than Wall Street predicted at the start of the year.

Dow 13,000. Nasdaq 3000. Thursday, the Standard & Poor's 500, up 11.5% this year, closed above 1400 for the first time since June 5, 2008.

While it took almost four years for the S&P 500 to claw its way back above 1400 after sinking into the 600s after its most serious slide since the Great Depression, the move back above the big round number came a lot sooner than most stock pundits expected.

At the start of the year, 10 of 13 stock strategists polled by Bloomberg News didn't even think the S&P 500 would hit 1400 by year's end. A handful of stock gurus have since raised their year-end targets to 1400 or above.

At Thursday's close of 1403, the S&P 500 is trading 3.5% above the average year-end price target of 1355.

Tobias Levkovich, Citigroup's chief U.S. equity strategist whose target is 1425, says investors "were not very well positioned" for the early-year rally. "Most of the move that happened in 10 weeks we were looking for over 12 months," he says. Investors will require "more good news" to keep the rally going, he adds.

Stocks' quick start has been driven by a stream of incoming U.S. economic data that have been better than expected. A big drop in the fear factor has also helped, as odds of a European-led financial meltdown have diminished.

The question now: Are most of the gains done?

UBS' Jonathan Golub, Wall Street's most bullish strategist, says no. Golub, who on March 1 raised his target from 1325 to 1475, says the improving economy will support corporate earnings and higher stock prices. The recent bank stress tests, which showed that U.S. banks are in good shape, gave the market an added "adrenaline burst," he says.

"Stocks are levitating like a balloon," adds Thomas Lee, chief equity strategist at JPMorgan. With stocks undervalued, underowned and cash-rich U.S. companies strong, "it is ridiculous to be bearish," says Lee, adding that the S&P could even take out its record high of 1565.15, set in October 2007.

Barry Knapp, head of equity strategy at Barclays Capital, acknowledges that his 1330 target may be too low. But he warns that risks associated with less stimulus from the Federal Reserve, potential profit pressure caused by higher gasoline prices and a resurgence in political and policy headwinds could stall the rally. In a recent note titled "April Showers," Knapp warned of a possible pullback.