Earnings, better outlook help send stocks to 2009 high

NEW YORK -- The broad U.S. stock market hit a new 2009 high Monday amid more good earnings reports, fresh evidence pointing to better days ahead for the economy and a bullish market call from a respected Wall Street bank.

The gains were broad-based, adding to last week's impressive 7% gain. The benchmark Standard & Poor's 500 index rose to its highest level since the bear market ended in early March. The blue-chip Dow Jones industrial average turned positive for the year. And the Nasdaq composite finished up for a ninth-consecutive session.

Market sentiment has turned more upbeat recently, and that newfound confidence was most visible in Goldman Sachs' decision to up its year-end price target on the S&P 500 from 940 to 1060, which is 11.4% higher than Monday's close of 951.13. The call was based on Goldman's belief that companies in the index would post bigger profits both this year and next year than previously estimated

Similar bullishness — at least in the short term — can be found elsewhere. Merrill Lynch reiterated its upside target of 1055-1065 on the S&P 500 Monday. Strategas Research Partners said it believes fair value is around 990 — or up 4% from here. But the firm's founder, Jason Trennert, also laid out a more bullish, yet lower probability scenario that would drive the market up 18% to the 1120 level; that call is based largely on investors' willingness to pay more for each $1 of earnings. "There is a greater willingness to take risk," says Nick Kalivas, vice president of financial research at MF Global.

One reason risk aversion is abating is the strong start to the second-quarter earnings-reporting season. Seven out of 10 companies have topped expectations.

Performance anxiety is another factor. As stocks keep rising, professional money managers whose performance is compared with indexes such as the S&P 500 have been putting more money to work in stocks to keep up, Kalivas says.

Investors are more confident that the economy will start growing later this year. A private research firm reported that its index of leading economic indicators rose in June for a third month in a row.