Updated July 3, 2014 4:07 p.m. ET
Strong news about the U.S. economy pushed the Dow Jones Industrial Average above 17000 for the first time Thursday, bolstering the belief among investors that the five-year bull market has more room to run.
The Dow's move came just 153 trading sessions since it first closed above 16000 on Nov. 21, 2013, making it be the seventh-fastest 1000-point gain in the blue-chip barometer's history. The Dow's advance Thursday leaves the index up 3% for the year, with 14 record closes along the way. The index is up nearly 14% from a year ago.
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The jump above 17000 was spurred by a report from the Bureau of Labor Statistics showing U.S. employers added a net 288,000 jobs in June, well above the 215,000 expected by economists.
The unemployment rate unexpectedly fell to 6.1% in June, from 6.3% in May.
The strong report for June led some analysts and investors to wonder if the Federal Reserve will raise interest rates sooner than expected. The odds of a rate increase at the Fed's June 2015 meeting were 57% after the report, up from 51% a day earlier, according to data from CME Group. A month ago, the odds were 43%. Meanwhile, the yield on the U.S. Treasury 10-year note ticked up to 2.65% from 2.626% on Wednesday.
But for now, stock investors don't see higher interest rates as an immediate worry, given that inflation pressure is still low.
Instead the evidence of an improved labor market was seen as supporting the run higher in stocks this year.
"This gives confirmation that broader economic trends are pretty healthy." said Michael Purves, chief global strategist for Weeden & Co.
Mr. Purves was especially heartened by the fact that the numbers for April and May were revised upward. "We're starting to see some real consistency," he said. "That is very important for investors who are late to the party" and missed the 2013 rally.
The milestone comes after the Dow had a sluggish start to 2014. In recent weeks, the blue chips have perked up as concerns about the U.S. economy that dogged investors earlier in the year have abated.
"It's an accomplishment. It's somewhere between a big birthday and landing on the moon," said Jack Ablin, chief investment officer at BMO Private, which oversees $66 billion. While the importance of the Dow passing millennial markers can be debated, such moves can at the least grab investor attention and help boost confidence. "The market can look more attractive at higher numbers," Mr. Ablin said.
The move to 16000 from 15000 took 139 trading sessions, while the rise to 15000 in May 2013 from the first close above 14000 in July 2007 took 70 months.
The fastest 1000-point move was completed in May 1999, when the Dow rose to 11000 from 10000 in just 24 trading days.
The S&P 500, which is more commonly used as a market benchmark by professional investors, has been on its own record-breaking push higher. It has set 25 new highs in 2014 and is just 0.7% away from breaching the 2000 level for the first time. The S&P tracks 500 stocks, a broader swath of the market than the 30 issues in the Dow.
The markets' record run comes against a backdrop of a slow, but steadily improving U.S. economy, and a market-friendly environment, with low interest rates and inflation. At the same time, diminishing worries about economic growth in Europe and China have also provided support for sentiment.
And while the Federal Reserve has been reducing its easing efforts by paring back its bond-purchase program, investors note that policy makers have done so at a slow and steady pace. Fed officials have soothed investors' worries by saying short-term interest rates will be kept near zero at least until next year.
That backdrop has stocks still looking attractive compared with bonds and other assets, investors say.
"You're confined to stocks, because money-market instruments don't pay anything, and Treasury yields are so low," said William Lynch, director of investments at Hinsdale Associates, which manages about $150 million in assets.
Even after the Dow's rise above another milestone, valuations aren't extremely stretched by historical standards. As of Wednesday, the Dow's price/earnings ratio, using consensus analyst estimates of profits for the Dow components over the next 12 months, was 14.5, according to FactSet. That is between the 10-year average of 13.5 and the 15-year average of 15.0.
The S&P 500's P/E ratio was 15.7, above its 10-year average of 13.8 and creeping toward its 15-year average of 15.8, according to FactSet.
Within the Dow, the stocks that performed best over the last 1000 points were Caterpillar Inc. CAT +1.39% Caterpillar Inc. U.S.: NYSE $111.08 +1.52 +1.39% July 3, 2014 1:00 pm Volume (Delayed 15m) : 2.82M AFTER HOURS $111.20 +0.12 +0.11% July 3, 2014 4:22 pm Volume (Delayed 15m): 52,412 P/E Ratio 18.51 Market Cap $68.53 Billion Dividend Yield 2.52% Rev. per Employee $469,929 07/03/14 Five Stocks Drive Dow to New R... 06/26/14 For Bonds, the 'Century Mark' ... 06/23/14 Ex-Im Bank Hits Hurdle in New ... More quote details and news » and Walt Disney Co., which have rallied roughly 35% and 24%, respectively. On a point basis, Caterpillar has contributed about 186 points to the Dow's gain and Disney has added 109 points.
The biggest losers since 16000 were Procter & Gamble Co., which fell about 6%, and Pfizer Inc., which shed roughly 5%. They shaved about 30 points and 9 points, respectively, off the index since Nov. 21.
The Dow's relatively rapid march to a new highs hasn't generated a lot of excitement among investors in the broader stock market of late. The S&P 500 hasn't made a move of more than 1% since April 16, the longest such stretch since 1995.
Investors have been holding back putting new money to work in stocks with the Dow at record highs, for fear of buying near a market peak, money managers say. But waiting for a significant correction before buying hasn't worked, as the Dow hasn't dropped more than 10% in nearly three years.
"The advice we've given clients that are looking to put money to work, the concept of waiting for a correction is a bad strategy," said Jim McDonald, chief investment strategist at Northern Trust, which has $915 billion in assets under management. Even at record highs, "we're still favorable on the stock market, especially in comparison to other investments."
—Alexandra Scaggs contributed to this article
Write to Tomi Kilgore at tomi.kilgore@wsj.com
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