Stocks finished near session highs Tuesday, with the S&P 500 touching a fresh high and the Dow within 50 points of an all-time record, as investors looked ahead to the Federal Reserve's announcement.
"Buying each and every dip in the averages is alive and well. In the face of a steady Vix, lagging NYSE breadth and the Russell 2000 not participating, the S&P marches to another new high," noted Elliot Spar, market strategist at Stifel Nicolaus. "What will stop the market advance? When the market is in this mode, it may need a key reversal day, too many groups acting poorly (on the same day), the buyers just get exhausted or nothing at all."
The Dow Jones Industrial Average soared 111.42 points, to close at 15,680.35, led by IBM and AT&T. The blue-chip index is within 50 points of hitting its record set in September.
The rallied 9.84 points, to end at 1,771.95. And the Nasdaq gained 12.21 points, to finish at 3,952.34. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, closed above 13.
Earlier, the Nasdaq was hit with another market glitch and remained frozen for nearly an hour. The indexes resumed normal quotation just after 12:37 pm ET. The Nasdaq later explained that "human error" caused the outage.
Most key S&P sectors finished in positive territory, boosted by telecoms and consumer staples.
"There's usually a bit of caution going into the Fed meeting, but this is a market that's fairly optimistic that [the Fed] is going to have a dovish statement," said Quincy Krosby, market strategist at Prudential Financial. "This has become a taper-on, taper-off market instead of a risk-on, risk off."
(Read more: Boehner: Obamacare'a wet blanket' over economy)
The Federal Reserve started their two-day FOMC meeting with the announcement expected Wednesday afternoon. Central bank members are expected to maintain the monthly $85 billion bond purchasing program until April 2014, according to the latest CNBC survey.
"A patch of weaker U.S. data poses something of an equity navigational challenge as Fed 'taper' expectations creep further into the future, extending the cheaper-U.S.-dollar lifeline for structurally weaker economies most particularly among the [emerging markets]," wrote Michael Kurtz, global head of equity strategy at Nomura.
(Read more: Data will be the key as Fed meeting starts)
The Fed last met in September and surprised markets with its decision not to start tapering its massive bond-buying program. Recent lackluster data from the U.S. and the political impasse over the country's budget has reinforced the general opinion among economists that the central bank will not taper imminently.
JPMorgan slipped after the Wall Street Journal reported that the bank's $13 billion proposed deal with the Justice Department is at risk of collapse. The Journal reported fights over separate criminal charges and insurance could scuttle the deal.
IBM zipped higher after the computer hardware and software company added $15 billion to its stock buyback program.
Among earnings, Apple topped quarterly expectations, but gains were limited as the iPhone maker projected gross margins for the current quarter below Street estimates. Still, at least 11 brokerages boosted their price targets on the firm. Still, the tech giant erased its year-to-date losses and turned positive for 2013.
Aetna ticked lower after the health insurance company reported earnings that missed expectations and gave a full-year profit outlook that was below estimates.
On the economic front, retail sales slipped in September, according to the Commerce Department, disappointing economists who had expected a gain. Adding to woes, consumer confidence fell sharply in October, according to the Conference Board.
Elsewhere, producer price index unexpectedly dipped in September, according to the Labor Department, logging the first decline since April.
Treasurys held slight gains after the government auctioned at a high yield of 1.300 percent. The bid-to-cover ratio, an indicator of demand, was 2.65, versus a recent average of 2.68.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
On Tap This Week:
WEDNESDAY: Mortgage applications, ADP employment report, consumer price index, oil inventories, 7-yr note auction, FOMC mtg announcement, Target analyst day; Earnings from Barclays, Comcast, General Motors, Facebook, Visa, Allstate, Expedia, Kraft Foods
THURSDAY: Challenger job-cut report, jobless claims, Chicago PMI, natural gas inventories, farm prices, Fed balance sheet/money supply, Container Store IPO, Oracle shareholders mtg; Earnings from ConocoPhillips, ExxonMobil, MasterCard, Sony, Starbucks, AIG
FRIDAY: Fed's Bullard speaks, PMI manufacturing index, ISM manufacturing index, Fed's Kocherlakota speaks, auto sales; Earnings from Chevron
What's Trending on CNBC.com: