Stocks continued to rise on strong earnings and economic news as the S&P was on pace to double from its lowest level during the financial crisis.
The Dow Jones Industrial Average rose more than 50 points a day after the blue-chip index paused for breath.
Among Dow components, JPMorgan , Hewlett-Packard and Boeing rose, while Verizon and Wal-Mart fell.
The S&P 500 gained, rising to more than 1,333.58, double its level from its March 6, 2009 intraday low. The Nasdaq also gained. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 16.
Most key S&P sectors gained, led by energy, materials and technology, while telecom fell.
Some Federal Reserve officials believed the strenghtening economy warranted putting the brakes on the Fed's $600 billion economic stimulus program, but they concluded the economy remained weak enough to continue.
The Fed also revealed their latest economic forecasts, lowering their outlook for core inflation to 1.25 percent for 2012, noted John Canally, economist at LPL Financial.
"By lowering the core inflation forecast, it tells you they are in no hurry to raise rates," Canally said.
The fact inflation is projected to remain subdued isn't a surprise, despite the focus lately on rising food and energy costs and their eventual effects on the U.S. economy, he added. Food and energy costs actually make up a small percentage of the costs consumers pay, while prices of other elements of the CPI, such as furnishings, are falling.
"There a disconnect between actual inflation and perceptions of inflation that has to be resolved," Canally added. "All the measures I look at, both observed and forecast, are low and stable."
Oil, meanwhile, gained after news from Israel's foreign minister that Iran plans to move two warships through the Suez Canalto Syria, although prices eased off highs of the day. Brent crude rose to nearly $104 a barrel, while U.S. light sweet crude rose more than $85 a barrel.
The dollar, however, fell against the euro and a basket of currencies. The price of gold rose above $1,374 an ounce.(Read more: Dollar Zigs Instead of Zags.)
"The dollar is being sold off against the Swiss franc and the euro because, should there be a conflict with Israel, this would be bad for the U.S. as well," Brian Dolan, chief currency strategist at Forex.com told CNBC.
Despite the downdraft in the market at mid-day, stocks held their ground and slowly rose, although the major indices remained off their highs. Paul Brigandi, vice president at trading at Direxion Funds, says the market is slowly trending upwards, buoyed by steadily improving economic news and a strong batch of earnings in the fourth quarter.
Even on down days, like Tuesday, there's little follow through, Brigandi said.
"That tells you there’s underlying support in the market, that buyers are coming in at any little signs of weakness," he said.
Nearly 90 percent of all energy stocks rose on Wednesday, led by Denbury Resources , Halliburton and FMC Technologies .
Meanwhile, Air Products & Chemicals led materials stocks higher after news it would no longer pursue Airgas. That's because a judge upheld Airgas's use of a poison pill defense against Air Product's $5.9 billion hostile bid for the company. Also higher were metals and mining companies, including US Steel , AK Steel and Titanium Metals .
In earnings news, Dell soared after reporting quarterly earnings that outpaced Wall Street expectationsafter the closing bell on Tuesday, thanks to business spending on technology hardware. At least seven brokerages raised their price target for the stock.
Comcast shares advanced after the new parent of CNBC reported its profits rose to 36 cents a share, and said it would boost its dividend by 19 percent.
Deere'sprofit doubled, sending the agricultural machinery maker's shares up to a new high.
Abercrombie & Fitch gained after the teen retailer beat earnings expectations with a 95 percent jump in profits. The firm benefited from international sales, which rose 61 percent in the quarter compared with a 16 percent gain in the U.S.
Office Max shares fell after the office supplies retailer said it expects a weak sales outlook, and sales fell short of expectations. Rivals Office Depot and Staples also slumped.
And BHP Billiton fell even after the global mining company said it would hand back $10 billion to shareholders through an expanded share buyback after nearly doubling its first-half profit to a record on booming iron ore and copper prices.
In M&A news, Family Dollar skyrocketed after news Trian Capital, owned by Nelson Peltz, would take the discount retailer privatein a deal valued at $7.6 billion, according to a regulatory filing, CNBC reported. Rival Dollar Tree jumped on the news.
Sanofi-Aventis and was in focus after the French drugmaker agreed to buy the U.S. company $20.1 billion in cash.
Also, St. Joe gained after news David Berkowitz of Fairholm Capital is seeking to replace the board of directorsof the Florida real estate company. Berkowitz, whose mutual fund owns nearly 30 percent of St. Joe, resigned from the board earlier this week. St. Joe rejected Berkowitz's plan.
On the tech front, Research In Motion gained after Citigroup upgraded the Blackberry maker to "buy" from "sell," and boosted its price target to $80 a share from $56, saying it would benefit from Nokia's decision to partner with Microsoft to produce smartphones.
But Citigroup cut its price target for Motorola Mobility Holdings to $32 a share from $34.50.
Verizon , meanwhile, said it was pleased with its sales of Apple's iPhone, disputing reports by Boy Genius Report that sales of the smartphone didn't meet expectations.
Among retail stocks, Gap rose for a second day after Citigroup raised the the stock to "hold" from "sell."
In economic news, the core producer price index,excluding volatile food and energy prices, rose 0.5 percent in January compared with a 0.2 percent gain in December, the Labor Department reported Tuesday. The overall PPI rose 0.8 percent versus a 0.9 percent gain in December, the government said. Economists surveyed by Reuters had expected the core PPI to rise 0.2 percent.
Also, housing starts rose 14.6 percent to a seasonally adjusted annual rate of 596,000 units, compared with a downwardly revised gain of 520,000 units in December. The January jump was the to the highest level since since September.
Housing permits, however, fell 10.4 percent to a 562,000-unit pace last month, after a 15.3 percent gain in December. January permits were hurt by a 23.8 percent drop in multi-family permits.
Earlier, the Mortgage Bankers Association reported its seasonally adjusted index of mortgage applications, including applications to refinance as well as purchase, dropped 9.5 percentin the week ended Feb.11.
The MBA's seasonally adjusted index of refinancing Also, U.S. industrial output fell 0.1 percent from an upwardly revised 1.2 percent gain in December, according to a Federal Reserve report. The drop was more than expected by economists surveyed by Reuters had expected a 0.5 percent gain.
Meanwhile, capacity utilization fell to 76.1 percent in January from an upwardly revised 76.2 percent, falling short of the 76.3 percent gain expected by economists surveyed by Reuters.
The big event of the day could be minutes from the Federal Reserve last meeting, released at 2 p.m. ET. Traders will be watching that for any change in tone about the Fed's program of buying $600 billion in long-term Treasury securities to boost the economy, known as quantitative easing.
Societe Generale's profits nearly quadrupledin the final quarter of last year, thanks to a pick-up in its retail banking and core equities derivatives businesses, news that banking shares in Europe. European shares closed higher, driven by strong earnings. FTSEurofirst300 index rose 0.6 percent.
On the Calendar:
WEDNESDAY: FOMC minutes; earnings after-the-bell from CBS, NetApp and Nvidia.
THURSDAY: Weekly jobless claims, CPI, leading indicators, Philadelphia Fed survey, Chicago Fed President speaks, money supply; earnings before-the-bell from Barrick Gold, AngloGold and Nordstrom.
FRIDAY: Earnings before-the-bell from Campbell Soup.
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