U.S. stocks rose on Wednesday, with the Dow Jones Industrial Average hitting its first record close of the year, as Wall Street welcomed a further reduction in the Federal Reserve's monthly bond purchases while looking past data showing the economy slowed more than expected in the first quarter.
"Who would imagine we would get a first-quarter GDP print so disappointing and yet we're closing the stock market at a high. That shows investors are absolutely looking past the first quarter, and looking to the Fed to continue with lower rates," said Chris Gaffney, senior market strategist at Everbank..
In its statement, the central bank said the economy has gained traction recently after a sharp slowdown. It trimmed its monthly asset purchases to $45 billion, making its fourth consecutive $10 billion cut.
"The Fed has given investors what they were expecting, and investors like that stability," said Gaffney.
Equities had fluctuated ahead of the Fed move while weighing reports that had growth stalling in the first quarter and employers adding more workers than projected to their payrolls in April.
The government's estimate that the U.S. economy grew 0.1 percent in the first quarter, versus a 1.2 percent estimate, drew a muted reaction from stock futures ahead of Wall Street's open.
"GDP was a bit of a shock, there is no doubt about that, but that fact that nobody is talking about recession and futures are flat tells you all you need to know. The economy was impacted by the weather and will likely improve as the year progresses," said Dan Greenhaus, chief market strategist at BTIG.
The much weaker-than-expected GDP "gives the Fed a whole lot more leeway to keep doing what they're doing. They've said they intend to keep rates near zero until 2015, and if you look at today's GDP report, you start to believe it," said Bruce Bittles, chief investment strategist at RW Baird & Co..
Rising above its record closing high of 16,576.66, hit on Dec. 31, the Dow Jones Industrial Average ended at 16,580.84, up 45.47 points, or 0.3 percent, with Goldman Sachs Group pacing blue-chip gains that extended to 17 of its 30 components.
The added 5.62 points, or 0.3 percent, to 1,883.95, with materials faring the best and energy falling the most among its 10 major sectors.
The Dow rose 0.8 percent in April and the S&P 500 added 0.6 percent for the month, with both up three months in a row.
After spending most of the session in the red, the Nasdaq advanced, gaining 11.01 points, or 0.3 percent, to 4,114.56, leaving it down 2 percent for April, its second monthly decline.
"The Nasdaq was obviously hurt by Twitter," said Greenhaus, chief market strategist at BTIG, of the microblogging site, which fell to an all-time low of $37.24 during the session, a day after reporting earnings that revealed lackluster user and usage growth for a second quarter.
EBay also declined after the online auctioneer projected sales that disappointed. Pepco Holdings gained after Exelon agreed to acquire the distributor of electricity and natural gas for $6.83 billion.
For every share falling, two rose on the New York Stock Exchange, where nearly 909 million shares traded. Composite volume cleared 3.7 billion.
Another report on Wednesday had private employers adding 220,000 workers in April, with the prior month's job additions revised up to 209,000 from 191,000.
"The ADP report was more or less in line, but shows there was job creation in the month, and according to ADP it was the first back-to-back months of 200,000 jobs created since 2012, so that's a positive," said Greenhaus.
And, the Institute for Supply Management-Chicago business barometer expanded more than expected in April, jumping to its highest level since October 2013.
On Tuesday, stocks ended higher as investors embraced a round of better-than-expected quarterly earnings.
—By CNBC's Kate Gibson
Coming Up This Week:
Light vehicle sales
Earnings: ExxonMobil, MasterCard, ConocoPhillips, Cardinal Health, Mylan Las, Domino's Pizza, Iron Mountain, Beazer Homes, Generac,Expedia, American Tower, Cigna, CME Group, Goldcorp,Clorox, Calpine, Marathon Petroleum, Kraft, LinkedIn, Vertex Pharma, Akamai, Teva Pharma, Kellogg, Agnico Eagle Mines, Open Table
8:30 a.m.: Fed Chair Janet Yellen speaks to the Independent Community Bankers of America
8:30 a.m.: Initial claims
8:30 a.m.: Personal income
8:58 a.m.: Manufacturing PMI
10:00 a.m.: ISM manufacturing
10:00 a.m.: Construction spending
8:30 a.m.: Employment
10:00 a.m.: Factory orders
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