By MATT JARZEMSKY

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Traders worked the floor of the New York Stock Exchange on Tuesday.

The Dow Jones Industrial Average surged to its highest closing level ever, finally overcoming the losses tied to the financial crisis on the back of a tenacious stock rally that began in March 2009. And the blue chips did it with an exclamation point—a 125.95-point blast that left the old record in the dust.

UBS Director of Floor Operations and veteran stock trader Art Cashin joins The News Hub as the Dow closes at an all-time record high to describe the mood on the floor of the New York Stock Exchange. Photo: Getty Images.

"It really does represent an achievement that we have climbed out of this crater," said Jack Ablin, chief investment officer at Chicago's BMO Private Bank, which manages about $66 billion.

The Dow advanced 0.9% to 14253.77 Tuesday to top its previous high of 14164.53, set in October 2007. Stocks plunged in the wake of the financial crisis, with the benchmark bottoming at 6547.05 on March 9, 2009.

The Standard & Poor's 500-stock index rose 14.59 points, or 1%, to 1539.79 Tuesday. The Nasdaq (NDAQ) Composite Index added 42.10 points, or 1.3%, to 3224.13.

At the 2009 lows, "there was just this amazing fear of losing money, just this fear in people's eyes," said Erik Davidson, deputy chief investment officer at Wells Fargo Private Bank, which oversees about $170 billion in assets. But things have changed since, he said. "Between fear and greed, there's a stutter-step emotion—regret. That's what people are feeling now. They're kicking themselves for getting so scared."

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Nearly four years into the recovery from the longest recession since the Great Depression, stocks are riding expanding U.S. factory activity, higher spending by U.S. businesses and consumers and a recovering housing market. Strong service-sector data released Tuesday added to the picture of an improving economy.

Meanwhile, the Federal Reserve and other central banks have juiced equities by driving down yields in safe-haven assets. Bulls also note the Dow's valuation, which at a price-to-earnings ratio of 14 is 20% cheaper than in late 2007.

Stock Traders Celebrate Over the Years

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Fresh milestones for the Dow Jones Industrial Average are always cause for celebration among stock traders. Take a look back at shots from the floor of the New York Stock exchange from past jumps for the blue-chip index.

But skeptics point to a slowing earnings outlook and potential tax and spending headwinds as lawmakers sort out the U.S.'s debt troubles.

"It's good fundamental data that has been lacking," said Doug Cote, chief market strategist at ING Investment Management, which oversees $179 billion in assets. "This market has really been hanging on central-bank stimulus from around the world."

Mr. Cote, though, said he was encouraged by Tuesday's report from the Institute for Supply Management, which showed the nonmanufacturing sector expanded at a faster pace in February than a month earlier, bucking economists' forecasts for it to slow.

Traders on the New York Stock Exchange trading floor described the session as fairly typical. Some stepped back from their computer monitors to reminisce about 2007, when they said the mood was more electric as the blue chips hit new highs. They said the sluggish pace of economic recovery—and a sharply lower level of activity on the stock-exchange floor—made celebrations harder to come by this time around.

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Traders react at the end of trade at the New York Stock Exchange in New York, March 5, 2013.

"There's definitely more caution in the air this time," said Mark Otto, a Knight Capital Group (KCG) director based on exchange floor. Still, he said, "the momentum is to the upside."

European markets were broadly higher, with the Stoxx Europe 600 up 1.8% to its highest close since June 2008. Euro-zone retail sales rose more than expected in January, according to Eurostat. Markit's February composite purchasing managers index for the region was revised higher.

Asian markets bounced from the previous session's sharp declines. China's Shanghai Composite, which tumbled 3.7% on Monday after the introduction of new measures to cool the country's property market, climbed 2.3%. Departing Premier Wen Jiabao helped reassure investors as he kicked off the annual session of the National People's Congress by announcing an economic growth target of 7.5% for 2013, as expected.

Elsewhere, Australia's S&P ASX 200 gained 1.3% after stronger-than-expected retail-sales data and Japan's Nikkei Stock Average added 0.3% to close at a fresh 4½-year high.

Front-month April crude-oil futures added 0.8% to settle at $90.82 a barrel, while March gold futures advanced 0.2% to settle at $1,574.60 an ounce. The dollar eased slightly against both the euro and the yen. The 10-year Treasury note fell in price to yield 1.894%.

Among single stocks, Cisco Systems (CSCO) led gains across 27 of the 30 Dow stocks. Nine blue-chip stocks, including Johnson & Johnson (JNJ), Pfizer (PFE) and 3M, logged 52-week highs.

J.C. Penney (JCP) posted the biggest decline among S&P 500 components, after commercial landlord Vornado Realty Trust (VNO) moved to sell 10 million shares, or more than 40% of its holdings in the department-store chain.

Ascena Retail Group (ASNA) climbed after the operator of Dressbarn, Justice and Maurices stores reported a smaller-than-expected decline in earnings.

Qualcomm (QCOM) gained after the semiconductor maker raised its dividend by 40% and announced a $5 billion stock repurchase program.

Impax Laboratories (IPXL) slid after saying Food and Drug Administration inspectors have found continuing problems at its Hayward, Calif., manufacturing facility that may affect new and pending drug applications.

Santarus (SNTS) surged after the biopharmaceutical company reported fourth-quarter earnings and revenue that topped analyst expectations and affirmed its 2013 outlook.

Williams Partners fell after the natural-gas transportation company announced an equity sale.

Professional Diversity Network fell after the professional-networking website operator's initial public offering on the Nasdaq Stock Market.

Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com