Amid increased investor confidence that the worst of the credit crunch has passed, and helped by positive forward-looking comments from banks and the release of a stable manufacturing number, the Dow rallied into record territory yesterday, surging past 14,000 for the first time in more than two months to close at 14,087.55 at the start of the fourth quarter.

“The recession forecast has been wiped out,” the chief economist at Wachovia, John Silvia, said. “Essentially, investors feel that we’ve cleared the deck, took our losses in the third quarter, and can now look forward to the fourth quarter and increased profits.”

The Dow Jones Industrial Average rose 191.92, or 1.4%, surpassing its prior record close of 14,000.41 on July 19. The Dow also set a new intraday high of 14,115.51, surpassing the previous record of 14,021.95 on July 17.

Nearly all of the Dow Industrial’s members — 28 of 30 — posted gains yesterday, with several breaking years-long records. Procter & Gamble, McDonald’s, United Technologies, and 3M posted record highs. General Electric, Verizon Communications, International Business Machines Corp., and Coca-Cola closed at their strongest stock prices in nearly six years.

A number of factors helped drive the rally, including growing confidence that the Federal Reserve would cut rates when it next meets, October 30. This confidence was bolstered by the release of the economic indicator showing manufacturing grew in September at its slowest pace in six months. The Institute for Supply Management said its index of manufacturing activity was 52, slightly below the forecast of 52.5, but above 50, which indicates expansion.

“Manufacturing growth is lackluster, but not weak enough to heighten the risk of a recession or strong enough to prevent the Federal Reserve from cutting rates again,” the chief economist at Moody’s Investors Service, John Lonski, said. He said he expects the key rate to be cut by another 50 basis points, to 4.25%.

Also bolstering investor confidence was yesterday’s remarks by Citigroup Inc. and Switzerland’s UBS AG — both of which see significant losses in the third quarter — that the worst of the credit crunch has now passed them.

In a statement, Citigroup’s chairman and CEO, Charles Prince, called the bank’s third quarter showing “an aberration.” Citigroup, which employs about 25,000 people in New York City and is America’s largest bank by capitalization, expects write-downs of $1.4 billion in credit markets and $1.3 billion in securities backed by subprime mortgages and leverage-buyout loans. It is also predicting loses of about $600 million in fixed-income credit trading due to significant market volatility.

“Our expected third-quarter results are a clear disappointment,” Mr. Prince said. However, he added, “While we cannot predict market conditions or other unforeseeable events that may affect our businesses, we expect to return to a normal earnings environment in the fourth quarter.”

UBS, which said it would take a third-quarter charge of $3.4 billion, sounded a similar note. “Despite the unsatisfactory results for the third quarter, we still expect to end the year with a good level of profits and in a strong capital position,” the bank’s CEO, Marcel Rohner, said in a statement.

Investors thanked the banks’ transparency by snatching up shares, driving prices up. Citigroup rose 1.05 points, or 2.2%, to $47.72, while UBS, Europe’s third-largest bank, gained 1.69 points, or 3.2%, to $54.94.

After the morning’s positive news, many investors who were short on the bet that the market would drop began covering those shorts and driving up stocks even further. In addition to the Dow’s record rise, every other index posted significant gains. The Standard & Poor’s 500 Index rose 20.29 points, or 1.3%, to 1547.04, just six points off its record close of 1,553.08 on July 19. It also moved toward its intraday record high of 1,555.90 reached on July 16. The Nasdaq Composite Index gained 39.49 points, or 1.5%, to 2,740.99 — its first close in eight months above 2,740.

Even housing stocks — which have been battered by the subprime mortgage meltdown — posted gains yesterday. Among those whose stocks rose were Pulte Homes, Centex, and D.R. Horton. Citigroup raised its stock ratings for several of the sector’s companies, on the view they could benefit from any improvement in the stock market.