By Aaron Kuriloff, Corrie Driebusch and Akane Otani

The Dow Jones Industrial Average closed above 20000 for the first time Wednesday, fueled by a remarkable rally that began in 2009 as a bounce from the depths of the financial crisis, grew into a steady ascent and was then turbocharged by November's presidential election.

President Donald Trump's moves during his first week in office to promote infrastructure projects and cut regulation helped propel the 120-year-old index of 30 stocks over its latest milestone, as investors bet that he would follow through with business-friendly plans like cutting taxes and increasing government spending.

The Dow industrials raced past 20000 when the market opened Wednesday and held on to the gains throughout the session, closing up 155.80 points, or 0.8%, at 20068.51. The S&P 500 and Nasdaq Composite also reached records Wednesday.

Applause, whoops and cheers erupted on the floor of the New York Stock Exchange as the market closed. "It's been a long time coming," said Peter Tuchman, a veteran floor broker at the NYSE, who wore a cap with "Dow 20,000" emblazoned on it for the occasion. "We're all excited, but exhausted."

The Dow took almost 103 years to reach 10000 in March 1999. Reaching 20000 required nearly 18 years more.

And the last part of that climb was swift: It took the blue-chip index just 42 trading days to jump from its first close above 19000 to 20000 -- the second-fastest thousand-point gain in the index's history, after its 24-day climb from 10000 to 11000 during the dot.com boom in 1999.

The Dow industrials notched their first close above 19000on Nov. 22. amid the postelection rally that has sent the index up 9.5% since Nov. 8.

The Dow has come a long way to get to 20000. Investors watched the U.S. stock market lose trillions of dollars in value twice -- when the tech bubble burst in 2000 and during the financial crisis in 2008.

Even as indexes now soar, many investors urged caution. Interest rates are still relatively low, reflecting sluggishness in the global economy. Volatility has waned, and stocks are expensive compared with their historical levels -- three signs that some investors say could herald a pullback.

It hasn't been a straight path upward for the Dow. The index rose 7% from the close on Election Day through Dec. 8, but then gains slowed as investors questioned the likelihood and timing of Mr. Trump's policies. A postelection climb in the dollar and Treasury yields also stalled in recent weeks.

The Dow made several attempts at 20000, including when it touched 19999.63 on Jan. 6 but fell short each time -- until Wednesday.

Investors piled into manufacturing stocks this week, providing some of the momentum that carried the index over the top, after Mr. Trump's moves to revive oil-pipeline projects and ease regulations signaled the first steps toward clearing the way for a surge in infrastructure spending.

Recent data showing an acceleration in U.S. economic growth and an improvement in corporate earnings have also bolstered investors' outlook. Earnings for S&P 500 companies are expected to grow in the fourth quarter from a year earlier, according to analysts polled by FactSet. That would mark the second straight quarter of earnings growth after five quarters of contraction, according to FactSet.

"The gains are every bit as much that the economy is doing better and earnings are improving as it is a boost from hope for fiscal policies under Mr. Trump," said Bob Doll, senior portfolio manager with Nuveen Asset Management LLC, an investment firm based in Chicago.

Soaring shares of Boeing Co. led Wednesday's gains in the Dow industrials, with the aerospace company rising $6.81, or 4.2%, to $167.36 after beating expectations for earnings in the final quarter of the year.

Boeing's gain alone contributed more than 901 points of the Dow's last 10,000-point gain, surpassed only by 3M Co. whose gains added more than 1156 points. International Business Machines Corp. added 813 and Caterpillar Inc. 740.

But bank shares are responsible for much of the Dow's rise since Election Day. Many consider the health of the sector to be intertwined with that of the economy because of the fundamental role banks play in facilitating the flow of money and say the recent gains indicate that the nearly eight-year bull market can keep going.

The KBW Nasdaq Bank Index of large U.S. commercial lenders has soared 24% since Election Day, reflecting the prospect of higher interest rates and less-stringent regulation, which could ease some of the pressure lenders have faced since the financial crisis. The yield on the benchmark 10-year Treasury note is back above 2.5% after it fell to 1.366% on July 8, the lowest level on record, though rates are still low by historical standards. Yields fall as bond prices rise.

Gains in Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. together accounted for more than a quarter of the postelection point gain made by the Dow, a price-weighted measure that means the bigger the stock price, the larger the sway for a component.

Goldman joined the index in 2013, making it a relatively new entrant to the average that made its debut in 1896 with 12 "smokestack" companies, including Tennessee Coal & Iron, U.S. Leather and General Electric Co. (which was removed and restored along the way but is the only original componentin the current index). Technology companies including Microsoft Corp. and Intel Corp. were added in the 1990s, while companies such as Bethlehem Steel and Woolworth dropped out.

Wall Street Journal editors participate in selecting the stocks in the Dow, as they always have, though the index itself is now part of S&P Global Inc.

At stock brokerages across the country, traders said there were few cheers when the Dow hit 20000 on Wednesday morning. That mood was markedly different from 1999, when the Dow crossed 10000. Back then, the economy was booming, day traders abounded and stocks were roaring after Federal Reserve Chairman Alan Greenspan spoke of "irrational exuberance" in the market in 1996.

Iinvestors watched the U.S. stock market lose trillions of dollars in value twice -- when the tech bubble burst in 2000 and during the financial crisis in 2008. The number of stock traders also fell as computers rose in prominence."Back in 1999, when we hit 10000, you couldn't stand here -- you would've gotten run over," said Richard Barry, NYSE floor governor, who pointed to the trading floor where a few dozen traders stood executing orders Wednesday.

Some investors say milestones like 20000 deserve little attention.

"If you're in the market for a lifetime, which is the way people should be in it, it's a pleasant little thing, but no more than that," said John C. Bogle, founder of Vanguard Group, the Malvern, Pa.-based pioneer of low-cost, passively managed investment products.

The Dow Jones Industrial Average has risen 207% from March 2009, its low point during the financial crisis.

The 20000 mark has left some analysts and investors cautious.

A gauge that tracks expectations for volatility in stocks closed at its lowest level since July 2014 -- a bearish indicator to those that view low levels as a sign of investors' complacency. The CBOE Volatility Index, based on prices of S&P 500 options that investors tend to buy when they fear stock declines, fell to 10.81 on Wednesday.

"The three components for the Trump plan we think are most meaningful for companies are tax policy, regulation and infrastructure investment," said Joseph Amato, chief investment officer of equities at asset manager Neuberger Berman. "As the prospects of policy changes in those three areas waxes and wanes, enthusiasm for stocks will build up or enthusiasm will recede," said Mr. Amato.

Many investors worried stocks were expensive even before the postelection run-up, given several recent quarters of weak earnings growth. Companies in the S&P 500 traded at roughly 21 times their past 12 months of earnings as of Tuesday, above their 10-year average of about 16, according to FactSet.

Mr. Trump's protectionist approach on trade has also raised concerns that such policies could hurt growth. On Monday, bonds rallied and stocks fell after Mr. Trump said the U.S. would impose a border tax on companies that move some operations overseas and he withdrew the U.S. from the Trans-Pacific Partnership, a trade deal he attacked during the campaign.

A strengthening dollar could also hurt earnings at multinational companies by making their goods more expensive to buyers outside the U.S. The WSJ Dollar Index, which measures the U.S. currency against 16 others, fell 0.3% Wednesday but is up more than 3% since Election Day.

"The dollar is a real issue," said Russ Koesterich, co-portfolio manager of the BlackRock Global Allocation fund. "The protectionism is still an open question. We don't know how much of that we'll have and what form it will take."

The wait for 20000 paid off for Nicholas Tyburski, 37, and Jeff Coons, 51, neighbors from Bella Vista, Ark., who were selling red trucker hats on eBay with "Dow 20,000" back in early December.

When the Dow barreled through 20000 on Wednesday, Mr. Tyburski said the orders streamed in. At a little after noon Eastern Time, Mr. Tyburski said he had received about 100 orders at a rate of one every five minutes or so. He said the buyers were from all over the world: He will be shipping hats to Australia, England, Sweden and Malaysia.

"It's a remarkably strong market, but we knew that at 19999," said Mr. Bogle of Vanguard.

Sarah Krouse contributed to this article.

Write to Aaron Kuriloff at aaron.kuriloff@wsj.com, Corrie Driebusch at corrie.driebusch@wsj.com and Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

January 25, 2017 20:13 ET (01:13 GMT)

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