The Dow and the S&P closed at record highs on Tuesday, as concerns surrounding Brexit diminished and the prospects of further economic stimulus in Japan increased. The Nasdaq composite, meanwhile, closed in positive territory for 2016 on Tuesday.
"Bottom line, the S&P 500 is 1 percent above where it was 14 months ago and the optimism is back to being exuberant," Peter Boockvar, chief market analyst at The Lindsey Group, said in a Wednesday note to clients. "Earnings over the next month [will] help determine if all we've seen is a price chase or we are discounting a reversal in the downtrend in earnings."
Mark Luschini, chief investment strategist at Janney Montgomery Scott, said "we're stalled at these levels waiting for validation" that earnings will be positive.
Earnings season unofficially began Monday, with Alcoa posting better-than-expected results on both the top and bottom lines. On Thursday and Friday, financial giants BlackRock, JPMorgan Chase, Citigroup and Wells Fargo will report their quarterly results.
"What we have to hear from companies ... is what they see for the end of the year," said Kim Forrest, senior equity analyst at Fort Pitt Capital. "We cannot count on multiple expansion."
On the data front, U.S. import prices for June rose 0.2 percent, missing estimates, while export prices gained 0.8 percent.
The Federal Reserve released the latest edition of its Beige Book, which said economic activity in most regions increased at a modest pace.
"It had something for everybody," Janney's Luschini said, noting that it showed the economy was growing steadily, but not at a pace where the Fed would feel comfortable raising rates in the near future.
The Fed speakers' parade will also continue Wednesday, with Philadelphia Fed Patrick Harker scheduled to speak after the market closes.
Dallas Fed President Robert Kaplan said Wednesday morning he expects "slow" GDP growth in the U.S., adding the central bank is "very sensitive" to the dollar's strength.
On Tuesday, Minneapolis Fed President Neel Kashkari said the U.S. central bank should not be in a rush to raise interest rates.
Oil fell Wednesday, with U.S. crude settling at a two-month low of $44.75 a barrel. Weighing on crude were U.S. inventories data, which showed crude stocks fall by 2.54 million last week, as well as a build of 1.2 million gasoline barrels.
"When we were going from $30 to $25, oil and stocks were keenly correlated," Wunderlich's Hogan said. "Now with oil around $45 to $50, you can see oil having a bad day ans not adversely affect stocks."
U.S. Treasury yields traded lower, with the 10-year yield holding near 1.46 percent and the two-year yield near 0.66 percent.
The dollar traded about 0.2 percent lower against a basket of currencies, with the euro holding near $1.11 and the yen around 104.3. The pound traded lower, near $1.32, on David Cameron's last day as the United Kingdom's prime minister.
European equities traded slightly lower on Wednesday, with the pan-European Stoxx 600 index slipping about 0.1 percent. Asian stocks rose broadly, with the Nikkei 225 gaining about 0.8 percent.