Stocks rose for second day Wednesday as a Deere earnings beat and a rebound in housing starts helped renew investor optimism about the recovery.
Stocks briefly pared gains this afternoon after a report showed the Fed is ready to start pulling back on its massive stimulus measures.
The Dow Jones Industrial Average gained 40.43, or 0.4 percent, to close at 10,309.24. The S&P 500 added 0.4 percent and the Nasdaqadvanced 0.6 percent.
This came after stocks logged their best day in three months Tuesday, making it two straight days the market has finished higher — a rare feat in recent sessions.
Fed policy makers want to begin selling securitiessoon to pare the massive stimulus the central bank has pumped into the financial system, minutes from the last Fed meeting show.
"Policymakers were unanimous in the view that it will be appropriate to shrink the supply of reserve balances and the size of the balance sheet substantially over time," minutes from the January meeting said.
Bank of America led the Dow once again, finishing up more than 3 percent. United Technologies and Home Depot rounded out the Dow's top three; Kraftwas at the bottom of the pack along with one of last year's best performers, American Express .
Energy stocks were among the weakest links today as the dollar gained after the Fed minutes lifted recovery hopes.
Deere shares advanced 5.1 percent after the world's largest maker of tractors and harvesters blew past expectations, helped by wider margins at its farm-equipment and finance units.
Earnings from Martha Stewart and Whole Foods offered some encouragement on the consumer front.
Martha Stewart shares jumped 8.1 percent after the domestic diva's multimedia empire swung to a profit, helped by stronger revenue at the broadcasting, digital and merchandising divisions. Total revenue jumped 20 percent, though a big chunk of that was deferred Kmart royalties for Martha products sold there.
Shares of Whole Foods shot up 13 percent after the organic-foods chain beat earnings expectations and raised its outlookafter the bell Tuesday. At least two brokerages upgraded their rating on the stock.
In fact, in terms of sectors, today was all about the consumer: Discretionary-spending, health care and consumer staples were the day's best performers.
But it wasn't all smooth sailing: Campbell's Soup cut its sales forecast for 2010, projecting a 2.5 to 3.5 percent gain against a previous forecast of 4 to 5 percent.
And Humana announced plans to slash 1,400 jobs, or about 5 percent of its workforce, as health-care membership has taken a hit from high unemployment.
Some M&A news this morning: Walgreen plans to buy rival drugstore chain Duane Readefor $1.08 billion. The Reade chain is ubiquitous through New York City and will maintain its name.
Meanwhile, AIG's sale to MetLife is likely to be delayed because of a tax dispute that likely will require an Internal Revenue Service ruling, the Wall Street Journal reported.
In the day's economic news, housing starts rose 2.8 percent in January, better than expected, though building permits, a gauge of future building activity, fell 4.9 percent. But mortgage applications fell 2.1 percent last week even as mortgage rates neared a record low.
Separate reports showed industrial production rose 0.9 percentin January, better than expected, and import prices jumped 1.4 percent last month. Exports gained 0.8 percent.
After the bell, earnings are due from Hewlett-Packard , Analog Devices and Nvidia .
Aaron Rakers said he expects "positive" results from HP tonight amid healthy consumer demand for PCs following the release of Windows 7. He's got a "buy" rating and $62 price target on the stock, which is currently around $50. (Watch the video of Rakers' comments on CNBC.)
Discovery Communications shares got a boost from index buying as the stock is replacing Pepsi Bottling on the S&P 500. Soft-drink maker PepsiCo is acquiring Pepsi Bottling.
Investors got some insight into what the billionaires are buyingand selling today, based on quarterly filings from Warren Buffett, George Soros, and others.
Buffettt backed off energy, while Bill Ackman eased up on Target. George Soros and John Paulson piled into financials, while Carl Icahn played Take Two.
Trading was light, as just 7.76 billion shares changed hands on the NYSE, American Stock Exchange and Nasdaq combined, nearly 2 billion shy of last year's daily average. Advancers outpaced decliners, roughly 2 to 1, on the Big Board.
Still to Come:
WEDNESDAY: Earnings from HP, ADI, Nvidia, Priceline
THURSDAY: PPI; weekly jobless claims; leading indicators; Philly Fed; weekly crude inventories; Fed's Duke, Lockhart & Bullard speak; Earnings from Wal-Mart, DirecTV, CBS and Dell
FRIDAY: CPI; Earnings from JCPenney
Send comments to cindy.perman@nbcuni.com.
