The Dow index reached 18,041.2 in morning trading and the S&P 500 index also reach a new record high.
The US economy grew at its quickest pace in 11 years in the third quarter, the strongest sign yet that growth has decisively shifted into higher gear.
The final estimate of the US gross domestic product (GDP) for the third quarter was revised up to a 5 per cent annual rate from 3.9 per cent reported last month on stronger consumer and business spending, the government said.
The report easily topped expectations of a 4.3 per cent increase.
Connor Campbell from Spreadex.com said: 'Christmas Day isn’t until Thursday, but not one told the USA as impressive GDP figures led to an early influx of presents for the US markets.
'It was expected that this afternoon’s figures would have a big impact on the US markets; however, what wasn’t expected was a 5 per cent fourth quarter GDP that finally provided the Dow Jones with the fuel it needed to breach the 18000 mark.'
The economy expanded at a 4.6 per cent rate in the second quarter, meaning it has now experienced the two strongest back-to-back quarters of growth since 2003. Economists polled by Reuters had expected growth would be raised to 4.3 per cent.
However, it is expected that the pace of growth will have slowed in the fourth quarter.
GDP growth has now been revised up by a total of 1.5 per cent since the first estimate was published in October. Big revisions are not unusual as the government does not have full information when it makes its initial estimates.
US stock index futures extended their gains after the report, while US Treasury debt yields rose slightly. The dollar rose to a fresh eight-year high against a basket of currencies.
'That is a solid number, that is really what you want to see, you want to see it in demand,' said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
'That is a huge plus, a five handle on GDP is astounding to me, but I’m not going to turn it away - Merry Christmas.'Major Wall Street indices have risen for four straight sessions, pushing the benchmark S&P index to its 50th record high of the year. The S&P has risen 5.4 per cent over that period, its best 4-day run since July 2010. The rally comes on the heels of a sell-off, sparked by a slump in oil prices that saw the index drop nearly 5 per cent from its prior record high set on December 5.
Jasper Lawler, Market Analyst at CMC Markets UK said: 'With just over a week left until the end of the year, the Dow finally breached 18,000 after a surprisingly big upwards revision to US third quarter growth raised confidence in the US economy’s ability to ride out higher interest rates.
'Third quarter US GDP expanded higher by 5 per cent year-on-year well ahead of the 3.9 per cent previously estimated. Lower oil prices and rising employment spurred US consumers to head to the shops as household spending increased by 3.2 per cent.'
In a second report, the Commerce Department said non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, was unchanged after declining 1.9 per cent in October.
The continued weakness in the so-called capital goods orders is at odds with industrial production data, which has shown strong momentum in the manufacturing sector.
But a rapidly strengthening labour market and lower gasoline prices should provide the economy with sufficient momentum in 2015 and keep the Federal Reserve on course to start raising interest rates by the middle of next year.
Underscoring the economy's firming fundamentals, growth in domestic demand was revised up to 4.1 per cent in the third quarter instead of the previously reported 3.2 per cent. It was the fastest rate of increase since the second quarter of 2010.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew by 3.2 per cent, the fastest rate since the fourth quarter of 2013, instead of the previously reported rate of 2.2 per cent.
Growth in business investment was raised to 8.9 per cent from 7.1 per cent, with a stronger rate of spending than previously thought on equipment, intellectual property products and non-residential structures accounting for the revision.
Trading volume is expected to be light this week due to the Christmas holiday, which could increase volatility. US equity markets will open for an abbreviated session on Wednesday and be closed on Thursday.
Walgreen Co (WAG.N) advanced 1.1 per cent to $75.07 after the firm reported a better-than-expected quarterly profit.
The excellent US economic news makes it more likely that the Federal Reserve will raise interest rates earlier than expected in 2015 and earlier than in the UK.
Connor Campbell added: 'It is all but certain that the Fed will announce an interest rate hike next year, potentially earlier than the Bank of England’s intended raise in the UK.'
Anna Stupnytska, Global Economist at Fidelity Worldwide Investment said: 'Official Q3 GDP revised figures for the US and UK have moved in opposite directions today, and neither pieces of news comes as much of a surprise.
'The US economy remains in good shape, buoyed by stronger consumption, with current momentum likely to carry over into next year, implying a 2015 real GDP growth rate of above 3 per cent.
'Although the pace of growth acceleration through 2015 might be slower than in 2014, important policy tailwinds will support above-trend growth next year. And above all, the sharp decline in the oil price will continue benefiting consumers, boosting real incomes and spending.
'On the other hand, UK growth has lost steam in recent months, with the housing sector weakness now looking well-entrenched. In 2015, the headwind of political uncertainty is likely to weigh on confidence, at least for the first half of the year.
'However, the lower oil price should also start benefitting UK consumers, and although the associated boost to growth is unlikely to be as significant as in the US, it will still lend a welcome support. At the same time, the lid is likely to stay on inflation, lifting pressure off the Bank of England to tighten for the time being.'
