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US stocks rally; S&P 500 clears 2014 losses to end at record

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U.S. stocks rallied on Wednesday, with the S&P 500 clearing 2014 losses and closing at a record, as data cast an upbeat light on manufacturing in the New York region and Bank of America reported earnings and revenue that topped Wall Street's expectations.

"We have strong economic momentum coming into the new year. Stocks are no longer cheap, but they are not overvalued," said Kate Warne, investment strategist at Edward Jones. "With the momentum we're seeing in the economy, even the interest-rate-sensitive sectors can absorb it," she added.

Wall Street continued its surge after the release of the Federal Reserve's Beige Book, which found the economy to be expanding at a moderate pace, with some districts reporting a pickup in growth.

"People think the economy is on fairly good ground here, and they are starting to pile in; equities are largely under-owned, and people are getting statements from last year and starting to allocate to equities," said Joe Costigan, director of equity research at Bryn Mawr Trust.

Bank of America rose after the lender reported fourth-quarter earnings and revenue that topped estimates. Tesla Motors climbed after CEO Elon Musk said the electric-car maker expects to ship its first Model S vehicles to China in March. Apple gained after China Mobile said advance orders for iPhones had hit 1 million, and remained higher as the consumer-technology company agreed to settle with the Federal Trade Commission over a loophole that once let kids make in-app purchases without their parents' consent.

"For those suggesting the market 'needs' earnings growth or something along those lines, we'd point out that is exactly what is occurring," emailed Dan Greenhaus, chief strategist at BTIG, who added that fourth-quarter earnings should come in roughly 23 percent ahead of fourth-quarter results from 2012.

Data Wednesday showed manufacturing in the New York region increasing in January, with the Federal Reserve Bank of New York's economic index rising to 12.51.

Another report had U.S. wholesale prices rising in December, with inflation pressures remaining benign.

Symbol
Name
Price
 
Change
%Change
DJIA
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S&P 500
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NASDAQ
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After an 131-point climb, the Dow Jones Industrial Average rose 108.08 points, or 0.7 percent, to end at 16,481.94. JPMorgan Chase led gains that included 24 of the Dow's 30 components.

Clearing 2014 losses and hitting an intraday record of 1,850.84, the S&P 500 gained 9.50 points, or 0.5 percent, to close at a record 1,848.38, topping by a fraction its prior record close of 1,848.36, set on Dec. 31.

After hitting another 13-year high, the Nasdaq climbed 31.87 points, or 0.8 percent, at 4,214.88.

For every stock falling, roughly two gained on the New York Stock Exchange, where almost 718 million shares traded. Composite volume neared 3.8 billion.

On the New York Mercantile Exchange, crude-oil futures for February delivery gained $1.58, or 1.7 percent, to $94.17 a barrel and gold futures for February delivery lost $7.10, or 0.6 percent, to $1,238.30 an ounce.

The dollar turned flat against the currencies of major U.S. trading partners and the yield of the 10-year Treasury note rose 1 basis point to 2.886 percent.

On Tuesday, Wall Street chalked up its strongest performance in 2014 after upbeat retail-sales data for December helped offset concerns that came with Friday's monthly jobs report.

—By CNBC's Kate Gibson

Coming Up This Week:

Wednesday: Atlanta Fed's Dennis Lockhart on the economy and policy at 5:45 p.m. Eastern.

Thursday: Initial jobless claims at 8:30 a.m. Eastern. Consumer price index at 8:30 a.m. Eastern. Treasury international capital flows data at 9 a.m. Eastern. San Francisco Fed President John Williams on zero rate policy at 9:15 a.m. Eastern. Philadelphia Fed survey at 10 a.m. Eastern. NAHB survey at 10 a.m. Eastern. Fed Chairman Ben Bernanke at Brooklings Institution's Conference on Central Banking after the Great Recession at 11:10 a.m. Eastern. Earnings from BlackRock, Citigroup, Goldman Sachs, Taiwan Semiconductors, UnitedHealth, BB&T, Charles Schwab, First Republic Bank, American Express, Intel, PNC Financial, Capital One, Sallie Mae, People's United Skyworks Solutions.

Friday: Housing starts at 8:30 a.m. Eastern. Industrial production at 9:15 a.m. Eastern, Consumer sentiment at 9:55 a.m. Eastern, JOLTS at 10 a.m. Eastern. Richmond Fed President Jeffrey Lacker at 12:30 p.m. Eastern. Earnings from General Electric, Morgan Stanley, Schlumberger, Bank of NY Mellon, Comerica, SunTrust, Wipro.

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