U.S. stocks closed up more than 1 percent at session highs on Wednesday after the October Fed statement gave investors more confidence in the possibility of a December rate hike. (Tweet This)
The Federal Reserve kept interest rates unchanged in its statement released at the conclusion of its two-day meeting.
"I think the market's telling us they've fallen in love with free money," said Myles Clouston, senior director at Nasdaq Advisory Services. He also noted a camp that's "probably happy there's at least a possibility of a hike before the end of the year."
"I think once again we're going to see volatility into the rest of (Wednesday), into tomorrow as people digest the news," he said.
The Dow Jones industrial average closed up about 198 points after briefly falling 24.7 points after the 2 p.m.,ET, statement release. The index rose about as much as 130 points prior to the statement release.
Goldman Sachs and Apple contributed the most to gains. Procter & Gamble weighed the most on the index in the close.
"I think part of it is the equity market is perhaps getting a little more comfortable with the Fed raising rates but doing so at a (moderate) pace," said Tom Kersting of Edward Jones.
The major averages extended gains to trade more than 1 percent higher as the close approached, more than recovering from a brief dip into negative territory after the Fed statement release.
Bank stocks held higher despite the brief decline in the major averages, with the SPDR S&P Regional Banking ETF up 3.9 percent.
Financials had their best day since Sept. 8, jumping 2.4 percent to lead advancers in the S&P 500. Energy rallied 2.2 percent as the second-best gaining sector.
Crude oil settled up 6.3 percent at $45.94 a barrel, breaking three straight days of losses. The commodity extended gains after the U.S. government reported crude stocks rose last week, but gasoline and distillate inventories fell.
Treasury yields held higher, with the 10-year yield at 2.10 percent and the near 0.70 percent.
The euro weakened against the dollar to trade below $1.10, and the yen at 121.24 yen against the dollar.
Spot gold gave up gains of more than 1 percent to fall 1 percent after the statement release.
Eric Stein, co-director of global fixed income at Eaton Vance Management, noted the October statement downplayed concerns about global economic developments. "I certainly think it's a more hawkish statement than the market expected," he said.
"This means December is very much on the table for a rate hike if the data cooperates. It's all about the data, but given the weak data we've had the Fed doesn't seem overly concerned," he said.
In September, the Fed cited the potential impact from "recent global economic and financial developments" as a reason to hold off raising rates.
"The communication continues to go back and forth, and that's a little disappointing," said Todd Hedtke, senior vice president and chief investment officer at Allianz Investment Management, U.S.
"I tend to put a lot of weight on global developments, but (for the Fed) to drop it here entirely, I don't think the global situation has changed as much as they think it's changed. ... China and Europe are both still facing some significant headwinds."
Stocks opened mildly higher Wednesday and traded mostly higher as oil prices climbed.
Peter Boockvar, chief market analyst at The Lindsey Group, attributed some initial support to stocks from gains in European equities and Apple's stock, following earnings that beat expectations on both the top and bottom line. The iPhone maker's stock closed up 4.1 percent.
After the close Tuesday, Apple reported quarterly profit of $1.96 per share, 8 cents above estimates, with revenue slightly above forecasts. The company sold more than 48 million iPhones during the quarter and nearly doubled its China sales, but it did issue conservative current quarter revenue guidance.
Earnings season continues with PayPal, Yelp and Western Digital among those due to report after the close.
In other corporate news, Hyatt Hotels is in talks to buy Starwood Hotels & Resorts in a deal that is said to be as little as a week away, sources told CNBC. On Tuesday, shares of Starwood jumped on news at least three Chinese firms are competing to win government approval for a bid on the hotel operator.
Barclays appointed former investment banker Jes Staley as its new chief executive to start on December 1.
In a light day of economic reports, weekly mortgage applications fell 3.5 percent on a seasonally adjusted basis.
The U.S. advance September goods trade deficit was $58.63 billion.
Washington was also in focus as the House of Representatives is expected to vote on a bipartisan pact charting a two-year budget truce.
U.S. House Republicans nominated Rep. Paul Ryan as their candidate for the chamber's new speaker.
Dan Farley, regional investment strategist for The Private Client Reserve at U.S. Bank, said investors remain concerned about the political situation, the timing of a rate hike and the severity of slowdown in China.
"Until we get some clarity around those three things we think the market's going to be volatile," he said.
European stocks closed higher, with the DAX and STOXX Europe 600 up more than 1 percent, helped by the intraday recovery in oil prices. Asian stocks closed mostly lower as earlier declines in oil weighed but Japan's Nikkei gained amid hopes of further stimulus from the central bank's meeting later this week.
U.S. stocks closed mildly lower Tuesday, under some pressure from disappointing data, ahead of Apple earnings and the Fed's statement.
The Dow transports stabilized, closing up 0.08 percent after falling 2.64 percent Tuesday for its worst day since Aug. 24.
The closed up 24.46 points, or 1.18 percent, at 2,090.35, with financials leading eight sectors higher and consumer staples and utilities the only decliners.
The Nasdaq closed up 65.55 points, or 1.30 percent, at 5,095.69.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, held near 14.
About four stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 1.0 billion and a composite volume of nearly 4.7 billion in the close.
Gold settled up $10.30 at $1,176.10 an ounce.
On tap this week:
Earnings: Amgen, Paypal, Samsung Electronics, F5 Networks, GoPro, Marriott, Western Digital, Yelp
Earnings: Barclays, Royal Dutch Shell, MasterCard, Baidu, Starbucks, Sanofi, ConocoPhillips, Aetna, Air Products, Alexion, Delphi Automotive, Fortress Investment, Brunswick, NY Times, Johnson Controls, CME Group, Nokia, Praxair, Sherwin-Williams, Altria, Novo Nordisk, Ball Corp., Deckers Outdoor, Genworth Financial, Goodyear Tire, Pitney Bowes, Yamana Gold, Boston Beer, Outerwall, LinkedIn
8:30 a.m.: Jobless claims, Q3 GDP (Adv)
9:10 a.m.: Atlanta Fed President Dennis Lockhart in panel discussion
10 a.m.: Pending home sales
Earnings: Exxon Mobil, Chevron, Seagate, Brink's, CBOE Holdings, Rockwell Collins, Mylan Labs, Eldorado Gold, Public Service, Phillips 66, Rubbermaid, Aon, Calpine, Pinnacle West, A-B Inbev, AbbVie, Colgate-Palmolive, CVS Health
8:30 a.m.: Personal Income, Employment Cost Index
9:45 a.m.: Chicago PMI
10 a.m.: Consumer sentiment
10:50 a.m.: San Francisco Fed President John Williams
11:25 a.m.: Kansas City Fed President Esther George.
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