U.S. stocks climbed Wednesday, recouping a chuck of the prior two-day drop, after minutes from the Federal Reserve's last meeting noted an improving economy and labor market, while setting the stage for the central bank's eventual exit from its course of monetary easing.
The Federal Open Market Committee on Wednesday afternoon released minutes from its two-day gathering in June, at which the central bank reduced monthly bond purchases to $35 billion. The minutes pointed to the likely end of the asset-buying program also known as quantitative easing, or QE, in October.
Read MoreFed Minutes: QE likely to end in October
"Their assessment of the economy, we think, is that the economy can now take its training wheels off, that there is now some degree of sustainable momentum where we can talk about" removing accommodation, said Jim Russell, senior equity strategist for US Bank Wealth Management, who noted the minutes were taken before the surprisingly strong June payrolls report.
"It's pretty clear the Fed is serious about ending its program, likely in October. At this point the conversation should entirely focus on the exit strategy," said Dan Greenhaus, chief global strategist at BTIG.
"The end of QE sounds like it's right on schedule, we got a reaffirmation of what we think the path of monetary policy will be," said Art Hogan, market strategist at Wunderlich Securities.
Wall Street had risen ahead of the Fed minutes as Alcoa's quarterly profit bolstered optimism about the second-quarter earnings season, which gets under way in earnest next week.
"We got off to a good start with Alcoa, it just helps psychologically," said Jim Dunigan, managing executive, investments, at PNC Wealth Management.
Alcoa's earnings "really did benefit from improved industrial demand for its engineered products, as well as increased sales to the auto and aerospace industries," said Chris Muir, equity analyst at S&P Capital IQ.
Major U.S. Indexes
After initially cutting gains in the wake of the Fed release, stocks rose to session highs within 30 minutes.
The Dow Jones Industrial Average rose 78.99 points, or 0.5 percent, to 16,985.61, with Cisco Systems pacing blue-chip gains that extended to 22 of 30 components.
The advanced 9.12 points, or 0.5 percent, to 1,972.83, with consumer discretionary the best performing and utilities the least among its 10 major industry groups.
The Nasdaq added 27.57 points, or 0.6 percent, to 4,419.03.
For every three shares falling, more than four gained on the New York Stock Exchange, where nearly 569 million shares traded. Composite volume cleared 2.8 billion.
The 10-year Treasury note yield used in determining mortgage rates and other consumer loans on Wednesday held steady at 2.553 percent.
The dollar edged higher against the currencies of major U.S. trading partners, and dollar-denominated commodities including gold and oil were mixed.
On the New York Mercantile Exchange, gold futures for August delivery rose $7.80 or 0.6 percent, to $1,324.30 an ounce, and crude futures for August delivery fell $1.11, or 1.1 percent, to $102.29 a barrel.
"The lack of any new insurgency in Iraq has taken the disruption-of-supply bid out of the commodity," said Wunderlch's Hogan.
The Chicago Board Options Exchange Volatility Index (VIX) on Wednesday dropped less than half a point, or 2.8 percent, to 11.65.
The VIX, one measure of investor uncertainty, had surged 16 percent during the past two sessions, as technology shares and high-flying small-cap companies including Twitter, Pandora Media and Facebook were slammed.
"With an extended S&P 500 and earnings season now upon us, Mr. Market may have finally headed to the Hamptons and left us to deal with an expected pick-up in volatility that sure looks like it is coming to fruition," Andrew Adams an analyst at Raymond James, wrote in an emailed note.
Ahead of Wednesday's open, the Mortgage Bankers Association reported a rise last week in applications to buy a home, even as mortgage rates climbed.
Read MoreHigher mortgage rates not deterring buyers
On Tuesday, stocks skidded lower, as investors braced for quarterly earnings and considered valuations.
—By CNBC's Kate Gibson
Coming Up This Week:
Thursday
Earnings: Family Dollar, Progressive, Barracuda Networks, Chevron (preliminary), PriceSmart
8:30 a.m.: Jobless claims
10:00 a.m.: Wholesale inventories
1:00 p.m.: $13 billion 30-year auction
1:15 p.m.: Kansas City Fed President Esther George
Friday
Earnings: Wells Fargo, Infosys, Fastenal
2:00 p.m.: Federal budget
2:45 p.m.: Atlanta Fed President Dennis Lockhart, Chicago Fed President Charles Evans
More From CNBC.com: