U.S. stocks rallied into the close, with the Dow and S&P 500 ending the day at records amid encouraging economic reports on Wednesday.
Earlier, stocks held modest gains on the release of the Federal Reserve's Beige Book that said the economy continues to expand.
"It's certainly one of the most bullish reports I've heard," said Jack Ablin, chief investment officer at BMO Private Bank. "The outlook for the economy is better than investors feared."
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"Our economy has gotten out of the slow, steady growth phase," said Marc Chaikin of Chaikin Analytics, who believes that the stock market will continue to rise into the year's end as money managers realize their holdings have underperformed benchmarks.
"There's no other place for large pools of capital than the U.S. market," he said.
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"It's sort of a slow day," JJ Kinahan, chief derivatives strategist at TD Ameritrade said. "The path of least resistance has been higher."
The energy sector rose about 1 percent and was a leader on the S&P 500, helped by stabilization in oil prices and a report that showed a drop in oil supply for the last week.
The decline in oil inventories was "a bit of a pleasant surprise," said Peter Cardillo, chief market economist at Rockwell Global Capital.
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"It's all about the economic data, which continues to show growth," he said.
In the morning, the ISM services index beat expectations with a leap to a three-month high of 59.3 for November. Before the open, ADP report on private payrolls showed sector employment is keeping up its recent pace in November, although the 208,000 new jobs was a shade below expectations.
U.S. nonfarm productivity grew a bit faster than initially thought in the third quarter, while sharp downward revisions to compensation pointed to muted wage inflation that should give the Federal Reserve room to keep interest rates low for a while.
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Weekly jobless claims come out on Thursday, and the all-important jobs report is due on Friday.
"Look at the economic data today as a precursor to bigger numbers tomorrow," said Art Hogan, chief market strategist at Wunderlich Securities.
He noted that several retail companies have or will report earnings today and will reflect the impact of lower gas prices and other economic factors on consumer sentiment.
Abercrombie & Fitch reported a disappointing quarter before Wall Street opened, while Aeropostale is expected to post results after the bell.
"A lot of the reason for the recent rally in stocks comes from the seasonality...and the hope that global central banks are going to provide some support," said Nick Raich, CEO of The Earnings Scout.
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The European Central Bank is expected to discuss monetary policy on Thursday.
There's "not a lot of market movement today," said Randy Frederick, managing director of trading and derivatives at Charles Schwab. "They're kind of just sitting back to see if we get any kind of stimulus from Mario Draghi."
U.S. stock index futures were flat to slightly lower on Wednesday as Asian and European stocks traded higher.The Dow closed at a record on Tuesday, boosted by strong auto sales, the highest for the month since 2003.
Major U.S. Indexes
The Dow Jones Industrial Average closed up 33.07 points, or 0.18 percent, at 17,912.62, with UnitedHealth leading gains among 17 blue chips and American Express the greatest laggard.
The gained 7.78 points, or 0.38 percent, at 2,074.33, with materials leading sector gains and consumer staples the greatest of three laggards.
The Nasdaq closed up 18.66 points, or 0.39 percent, at 4,774.47.
Two stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 757 million and a composite volume of 3.5 billion in the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded above 12.
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The Dow Jones Transports closed up 0.79 percent.
The benchmark 10-year Treasury note yield fell to 2.28 percent. The U.S. dollar touched five-and-a-half-year highs against major world currencies.
Crude oil futures for January delivery settled up 50 cents at $67.38 a barrel on the New York Mercantile Exchange. for February closed up $9.30 to $1,208.70 an ounce.
"I think it would be better for the market if we found a floor around these levels and I'm optimistic we will," Dan Veru, chief investment officer at Palisade Capital Management, said about oil prices.
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Brown-Forman fell after the bourbon producer posted weaker-than-expected second-quarter results.
Johnson & Johnson edged lower on news that the pharmaceutical and packaged consumer goods manufacturer hired Goldman Sachs to explore a sale of its artificial sweetener brand Splenda.
Kraft also declined slightly after the food producer said it will raise prices on most of its single serve coffees in the United States by about 9 percent.
On tap this week:
Wednesday
Earnings: Aeropostale
7:30 p.m.: Dallas Fed President Richard Fisher
Thursday
Chain store sales
European Central Bank rate meeting
Earnings: Toronto Dominion, Zumiez, Smith and Wesson, Dollar General, Barnes and Noble, American Eagle Outfitters, Ulta Salon, Kroger
8:30 a.m.: Initial claims
8:30 a.m.: Cleveland Fed President Loretta Mester
1:15 p.m. Fed Gov. Brainard
Friday
Earnings: Big Lots, Vail Resorts
8:30 a.m.: Employment report
8:30 a.m.: International Trade
8:45 a.m.: Cleveland Fed's Mester
1000 a.m.: Factory orders
3:00 p.m.: Consumer credit
—By CNBC's Evelyn Cheng. Reuters and CNBC's Rich Fisherman contributed to this report.
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