An antiquated stock index crossed a meaningless threshold Wednesday, and all of Wall Street cheered. The Dow Jones Industrial Average, which since 1896 has used the share prices of a handful of giant companies to reflect broad sentiment in America’s stock market, closed a few points above 10,000. That’s 55% above its March 9 low, which in turn was 55% below its October 2007 high.

Banks have led the recovery, just as they led the downturn. The Dow Jones U.S. Financial Sector Index has risen more than 135% from its March low after falling 80% from its October 2007 high. JPMorgan Chase (JPM), a Dow component and the first big bank to report third-quarter financial results, boosted the index after it easily surpassed Wall Street’s earnings forecasts.

The news is mostly good. Big banks that return to profitability are likely to continue repaying taxpayer investments hastily arranged a year ago by the U.S. Treasury. (Smaller banks aren’t faring as well; more than 30 of them are behind on dividend payments owed to the public, up from 19 in May, according to an Oct. 7 report by USA Today.) Even unprofitable banks and other financially stressed companies have used a rising stock market to sell more shares to the public. Over the past six months, the “float” of shares made available to investors increased by a record $135 billion, according to Trim Tabs, a research service. In August, Citigroup (C) raised its share count from 5.5 billion to 11.4 billion, the largest dilution in history for an S&P 500 member.

But consider two reasons for concern. The first (and lesser of the two) chiefly affects stockholders. Periods of rapid share issuance tend to be followed by periods of poor stock-market performance, according to Trim Tabs. Lofty valuations don’t help. The broad U.S. stock market now trades at 20 times forecast 2009 earnings, vs. a historical average of less than 15. A pot of shares held since March could offer a reason for cheer, but savings dribbled into the market at today’s prices might produce meager returns.

The more worrisome sign is the renewed prominence of the financial sector, which now makes up 19% of the U.S. stock market’s value, up from about 13% at the start of the year. How much is normal? In the early 1990s, before the credit bubble of the past decade, financials were 7% to 11% of the market’s value. In 2006, at the height of the credit bubble, they were 22%.

Perhaps bank stocks are merely overpriced. Banks in the S&P 500 trade at about 40 times forecast 2009 earnings. But profits are expected to catch up soon. Early forecasts have them more than doubling next year, to more than 16% of overall U.S. corporate profits. Ultra-low interest rates are allowing banks to borrow cheap and lend dear, while government perks for houses and cars are enticing consumers to buy on credit.

The mischievous thing about financial bubbles is that before they pop, they look an awful lot like healthy economic growth. Asset prices rise, which makes borrowers more likely to repay their loans, which makes banks look smart for lending in the first place, and everyone spends. I want to believe that Dow 10,000 is a milestone on the path to a long-lasting recovery. I’d feel more confident if manufacturers were leading the gains.