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S&P ends at record high; Fed cuts stimulus, sees improvement

U.S. stocks climbed on Wednesday, lifting the S&P 500 to a record finish, after the Federal Reserve said the economy is rebounding and that interest rates would stay low for some time.

"We are inching from unprecedented accommodation to policy tightening, even though it's not imminent," said Anastasia Amoroso, global market strategist at J.P. Morgan Funds.

The Fed alluded to a slightly faster pace of interest rate increases next year, while suggesting benchmark borrowing costs in the longer term would be lower than the Fed has indicated before.

Fed Chair Janet Yellen attempted to "introduce a degree of uncertainty into fixed income, she sent a message to the market that we are in a pricing period of future rate increases. If the Fed raises short-term rates because there is more rapid growth, that is positive for cyclical parts of the stock market," said Amoroso.

Read MoreFed tapers another $10 billion

FedEx jumped after the shipper posted fiscal fourth-quarter earnings that beat estimates; Adobe Systems surged after reporting quarterly revenue above forecasts and Cisco Systems gained after Morgan Stanley advised purchasing shares of the networking-equipment manufacturer. ConAgra Foods fell sharply after the maker of Hunt's tomato ketchup and Slim Jim beef jerky estimated an adjusted quarterly profit below its forecast. Amazon.com rose after the online retailer's introduced its first smartphone at an event Wednesday afternoon.

"The transports have been doing very well this year, which is indicative of people thinking the economy is improving; it's an early indicator-type stock with the moving of packages around the world," said Robert Pavlik, chief market strategist at Banyan Partners of the results from FedEx, which also have shares of competitor United Parcel Service rising.

The Federal Open Market Committee cut its monthly asset purchases by another $10 billion to $35 billion, as expected.

Fed Chairman Janet Yellen told a news conference that inflation was expected to move gradually back to the central bank's 2 percent target.

"We were in the minority in expecting a hawkish shift in rate expectations but that's exactly what happened; median expectations for next year and 2016 ticked up but providing some support, longer term rates have come down to 2.75 percent from 4.00 percent," noted Dan Greenhaus, chief strategist at BTIG.

Read MoreBeware this move from the Fed

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After a 102-point jump, the Dow Jones Industrial Average ended at 16,906.62, up 98.13 points, or 0.6 percent, with Coca-Cola leading gains that included all but two of 30 components.

The S&P 500 rose to an all-time intraday high of 1,957.74, and closed at a record 1,956.98, up 14.99 points, or 0.8 percent.

Utilities paced sector gains and the Dow 15 Utility Average reached an all-time high.

The Nasdaq rose 25.60 points, or 0.6 percent, to 4,362.84.

The CBOE Volatility Index, one measure of investor uncertainty, dropped to a seven-year low.

For every stock falling, more than two gained on the New York Stock Exchange, where 628 million shares traded. Composite volume neared 3.1 billion.

Crude-oil futures for July delivery fell 39 cents to settle at $105.97 a barrel; gold futures for August delivery rose 70 cents to end the floor session at $1,272.70 an ounce.

The dollar held steady against the currencies of major U.S. trading partners and the 10-year Treasury yield fell 7 basis points to 2.586 percent.

Wednesday's economic reports included a sharp drop in mortgage applications last week, while the Commerce Department said the U.S. current account deficit widened in the first quarter.

"The mortgage index, that's all over the place, and the current account deficit, that's always all over the place as well, but always negative," said Pavlik in dismissing the significance of either report on stock-market moves on Wednesday.

U.S. stocks have risen in recent days as M&A and upbeat data on manufacturing offset worries about violence in Iraq and rising energy costs.

On Wednesday, Reuters reported the head of Iraq's state-run South Oil Company Dhiya Jaffar as saying ExxonMobil had carried out a "major evacuation" of staff and BP had evacuated 20 percent of its workers from the country.

Read MoreStocks rise for third day with Fed decision ahead

—By CNBC's Kate Gibson

Coming Up This Week:

Thursday

Earnings: Oracle, Blackberry

8:30 a.m.: Initial claims

10:00 a.m.: Philadelphia Fed survey

10:00 a.m.: Leading indicators

Friday

Earnings: Darden Restaurants

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