U.S. stocks ended about 2 percent higher on Wednesday as markets extended gains on the FOMC minutes and recovered from Tuesday's selloff.
Closing 274.8 points higher, the Dow Jones Industrial Average had its best day since December 18, 2013. The index rose more than 275 points in intraday trade, briefly touching 17,000 and surpassing Tuesday's 273-point loss. The S&P 500 and the Nasdaq had their best day since nearly a year ago on October 10, 2013.
"This is the near-term good news," JJ Kinahan, chief strategist at TD Ameritrade, said, noting that fixed-income buyers tended towards the short end rather than the long end.
Alcoa posts quarterly results after the bell, kicking off a slew of company earnings and guidance reports expected in the next few weeks.
"I think as we move into the earnings season next week, the markets will focus more and more on what companies are telling us," Quincy Krosby, market strategist at Prudential Financial, said. The "data that is coming out is backward-looking. Companies have more of a kaleidoscope" view.
Stocks had traded flat to modestly higher before surging on the release of the Fed minutes in the early afternoon. The report showed that the Federal Reserve staff cut their growth outlook due to the higher dollar, as a number of committee participants had concerns with global weakness.
"The Fed minutes certainly leave us feeling that they are tiptoeing into the interest hike," said Art Hogan, chief market strategist at Wunderlich Securities. A "short-term, oversold market has this kind of reaction."
In corporate news, Costco earnings beat expectations on Wednesday, and investors are focusing on guidance during the upcoming earnings season.
From "Alcoa until two weeks from now, when we get into earnings season, the market is going to be extremely volatile," Marc Chaikin of Chaikin Analytics said. He added that October has historically been a month of extreme ups and downs.
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In the morning, J.C. Penney fell more than 5 percent on its long-term financial outlook. Earlier, the stock was briefly halted due to a volatility circuit breaker.
Sears also plunged, losing more than 14 percent, on reports that three insurance firms for its suppliers were reducing or cutting coverage.
Apple gained on the official announcement of a 'special event' on October 16. The iPhone maker also said it filing of its sapphire display supplier, GT Advanced Technologies. Activist investorCarl Icahn also promised to send an open letter to CEO Tim Cook on Thursday.
Earlier, low oil prices and a stronger dollar had weighed on energy. The sector was the hardest hit on the S&P 500, with several contract drilling and oil and gas production firms hit new 52-week lows.
"Oil is a key factor here," Peter Cardillo, chief market economist at Rockwell Global Capital, said. "If oil gets too low, it not only heightens fear of our economy beginning to weaken but it also increases the deflationary aspect of Europe and other parts of the world."
On Tuesday, German industrial output reported a 4 percent decline in August, with the worse-than-expected drop coming a day after the country's industrial orders had their largest monthly decline since the global financial crisis in 2009. The International Monetary Fund also downgraded its global growth forecast for this year and 2015.
U.S. stocks had fallen sharply on Tuesday, extending losses into a second session with the S&P at 8-week lows and the Dow having its worst day since late July, as investors fretted slowing economic growth in Europe and the potential impact on coming third-quarter earnings from U.S. corporations.
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The Dow Jones Industrial Average recovered from its loss of 272.5 points on Tuesday to close up 274.8 points, or 1.64 percent, at 16,994.22, with Merck leading gains in all blue chips except for DuPont. Visa, 3M, IBM and Goldman Sachs were responsible for about one-third of the day's gains.
The closed up 33.79 points, or 1.75 percent, at 1,968.89, with health care leading gains as all 10 sectors advanced.
The Nasdaq closed up 83.39 points, or 1.90 percent, at 4,468.59.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell to trade near 15.
Roughly four stocks advanced for every decliner on the New York Stock Exchange in the close, with an exchange volume of 918.8 million and a composite volume of 4.4 billion, the highest since September 19 and the fifth largest volume day this year.
The 10-year Treasury note yielded 2.32 percent, falling by several basis points after the FOMC minutes. The U.S. dollar edged higher against major world currencies.
On the New York Mercantile Exchange, crude oil futures for November delivery lost $1.54 to end at $87.31 a barrel, its lowest close since April 2013. Gold lost $6.40 to settle at $1,206 an ounce.
Major U.S. Indexes
Other stocks in focus included GrubHub, initiated at "market outperform" by JMP Securities based on ease of use of the platform, as well as highly positive feedback from participating restaurants.
CLSA upgraded Applied Materials to "outperform" from "underperform," saying the company's execution has improved.
Allergan was expected to get a new takeover bid from Valeant Pharmaceuticals worth $191 per share, $15 higher than the prior bid, according to Dow Jones. Valeant and partner Bill Ackman of Pershing Square were said to be still working out timing and the mix of cash and stock to be offered. Separately, Reuters reported that Actavis is planning to approach Allergan again about a potential takeover deal.
On tap this week:
Thursday
IMF fall meeting
Earnings: PepsiCo
Chain store sales
8:30 a.m. Initial claims
9:00 a.m. Philadelphia Fed President Charles Plosser on monetary policy
10:00 a.m. Wholesale trade
10:30 a.m. St. Louis Fed President James Bullard, opening remarks at St. Louis Fed conference
10:30 a.m. Oil inventories
11:00 a.m. ECB President Mario Draghi at Brookings, DC
11:00 a.m. Fed Vice Chair Stanley Fischer at Brookings on ECB
1:00 p.m. 30-year bond auction
1:10 p.m. Fed Gov. Daniel Tarullo on regulatory reform
1:15 p.m. Richmond Fed President Jeffrey Lacker on growth and the labor markets
1:30 p.m. Fed's Fischer at IMF on global economy
3:40 p.m. San Francisco Fed President John Williams on economic outlook
Friday
Earnings: Fastenal, Infosys, Progressive
IMF fall meeting
8:30 a.m. Import prices
9:00 a.m. Philadelphia Fed's Plosser on monetary policy
1:00 p.m. Kansas City Fed President Esther George on economy
2:00 p.m. Richmond Fed's President Jeffery Lacker on the economy
2:00 p.m. Treasury budget
CNBC's Peter Schacknow contributed to this report.
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