U.S. equities closed higher on Wednesday as investors digested the release of the Federal Reserve's October meeting minutes.
The minutes showed that many members of the Federal Open Market Committee believe a rates hike next month would be appropriate.
"That's not a surprise given what [Fed Chair Janet] Yellen said a couple of weeks ago," said Matt Tuttle, chief investment officer of Tuttle Tactical Management. "We need to convince them not to hike at this point."
The three major indexes hit their session highs following the release of the minutes, with the Nasdaq Composite outperforming.
"I think the market thinks [the Fed's] going to be very dovish in its trajectory," said Steve Blitz, chief economist at ITG Investment Research.
The Nasdaq rose about 1.8 percent as the iShares Biotechnlogy ETF (iBB) gained nearly 3 percent.
Nasdaq intraday chart
The Dow Jones industrial average gained 266.67 points at its highs, with Apple and Nike contributing most of the gains. The blue chips index also posted its best day since Oct. 22 and extended its winning streak to three days.
Apple's stock rose 3.17 percent after Goldman released a note saying the company's shares will rise 43 percent in the next 12 months.
The S&P 500 closed about its 200 day moving average for the first time since Nov. 11, as health care gained 2 percent.
"To me, the minutes were unusually clear," said Jeffery Elswick, director of fixed income at Frost Investment Advisors. "They seem to be leaning toward a December rate hike."
Elswick also said he believes there could be more volatility in the bond market as the December meeting draws closer.
"I think that the most interesting part about the minutes is not about the timing, but rather their understanding that they need to understand what the appropriate rate is," Blitz said. "They understand that being wrong is not an option."
Investors also took the overnight Paris raid as a positive, said Peter Cardillo, chief market economist at First Standard Financial. "I kind of suspect what we're seeing here is what happened on Monday with the situation in Paris."
French police carried out a large-scale operation in the northern Paris suburb of Saint-Denis on Wednesday morning, which lasted nearly six hours.
Officials said Abdelhamid Abaaoud — believed to be the mastermind who coordinated and ordered the attacks — was the target of the raids, which saw at least one woman killed after she detonated a suicide bomb. Speaking in Paris, French President Francois Hollande confirmed that two people died during the operation, the second being a man according to the Paris prosecutor, though further details have yet to be released.
The successful raid "sort of puts in the sense that the G-20 is taking a unified stance," Cardillo said.
Robert Pavlik, chief market strategist at Boston Private Wealth, echoed Cardillo's comments. "Maybe that added a semblance of confidence," he said, adding that these types of attacks usually have a temporary effect on financial markets.
"What you're seeing here is a reaction and that's a positive," said Art Hogan, chief market strategist at Wunderlich Securities. "We're going after the bad guys and that's certainly constructive."
Earlier, stocks traded in tandem with oil prices, which gained about 1 percent before paring gains, a day after closing $1 lower.
"Definitely oil is a concern because we're close back to the August lows," said Randy Frederick, managing director of trading and derivatives at Charles Schwab. "Anything below $40 starts to make the markets very nervous."
Last week, oil prices took a sharp turn lower following the release of U.S. inventories data. On Wednesday, the Energy Department said weekly inventories rose 252,000.
"Everybody is trying to call the bottom," said Bernie Williams, chief investment officer of USAA Investment Solutions. "It does seem like we've reached a bottom at around $41 a barrel."
U.S. crude settled up 8 cents, or 0.2 percent, at $40.75 a barrel, but not before dipping below $40 a barrel for the first time since August.
Investors also digested comments from two FOMC voting members.
Richmond Fed President Jeffrey Lacker told CNBC that any economic effects from the Paris attacks should be temporary, adding that he still believes the central bank should raise rates.
Atlanta Fed President Dennis Lockhart said Wednesday the central bank should start raising rates now that financial markets have "settled down."
"I am comfortable with moving off zero soon, conditioned on no marked deterioration in economic conditions," he said.
On the data front, U.S. housing starts for October fell 11 percent, while building permits rose 4.1 percent. Single-family building permits rose 2.4 percent to their highest level since December 2007.
"Bottom line, single family home construction continues to be historically depressed but is still near the highs of this recovery notwithstanding the modest month-over-month decline," Peter Boockvar, chief market analyst at The Lindsey Group, said in a note.
European and Asian equities closed mixed amid security concerns.
In corporate news, Lowe's reported better-than expected earnings per share and revenue, as same-store sales rose more 4.6 percent, also above expectations.
ConAgra Foods announced it plans on splitting into two publicly traded companies, on dealing with ConAgra's food service business, and the other with consumer food brands.
Citrix Systems said it will cut about 1,000 jobs and it will also spin off its GoTo software business into a separate public company.
Fairchild Semiconductor agreed to be bought by rival ON Semiconductor for $20 a share, or $2.4 billion.
Major U.S. Indexes
The Dow Jones industrial average closed 247.66 points higher, or 1.42 percent, at 17,737.1, led by Apple.
The ended 33.14 points higher, or 1.62 percent, at 2,083.58, with health care leading all sectors higher.
The Nasdaq rose 89.19 points, or 1.79 percent, to 5,075.2, as the iShares Nasdaq Biotechnology ETF (iBB) gained 2.92 percent.
The dollar traded near the flatline against a basket of major currencies. The yield on 10-year notes was higher at 2.27 percent, while two-year yields held at 0.87 percent.
Advancers led decliners 4 to 1 at the New York Stock Exchange, with an exchange volume of 907.1 million and a composite volume of 3.885 billion at the close.
Gold futures settled 10 cents higher at $1,068.70 an ounce.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 17.
On tap this week:
Wednesday
Earnings: Salesforce.com, L Brands, Keurig Green Mountain
Thursday
Earnings: Gap, Best Buy, Buckle, Williams Sonoma, Autodesk, JM Smucker, Intuit, Ross Stores, Mentor Graphics
8:30 a.m.: Initial claims
8:30 a.m.: Philadelphia Fed survey
12:30 p.m.: Atlanta Fed's Lockhart at Dekalb Chamber of Commerce
4:45 p.m.: Fed Vice Chairman Stanley Fischer on emerging Asia
Friday
Earnings: Abercrombie and Fitch, Foot Locker
9 a.m.: St. Louis Fed President James Bullard on economy and monetary policy
Saturday
1 p.m.: San Francisco Fed President John Williams on monetary policy
*Planner subject to change.
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— CNBC's Peter Schacknow and Kalyeena Makortoff and Reuters contributed to this report.
Correction: A previous version of this article misspelled Dennis Lockhart's name.