Wall Street ends higher as Fed keeps stimulus in place
NEW YORK (Reuters) - Stocks climbed on Wednesday, with the S&P 500 snapping a three-day losing streak as the Federal Reserve reassured investors that it would keep supporting the economy.
The housing sector's stocks ranked among the best performers after Lennar Corp (LEN.N) reported a first-quarter profit well above analysts' expectations as lower interest rates and rising rents increased home sales.
The Dow hit an intraday record high but fell short of closing at another record. The view that the Fed will keep interest rates at record lows for years has helped drive the rally in stocks this year, along with signs of a strengthening U.S. recovery.
In its statement, the Fed said it would stick to its $85 billion monthly bond-buying stimulus, citing still high unemployment levels, but said it would take into account the possible risks of its policies.
The statement, and comments by Fed Chairman Ben Bernanke, came as the market grapples with banking woes in Cyprus, the most recent flare-up in the euro-zone debt crisis.
"It is amazing what a Fed on your side really brings for this market... It really can wipe out a lot of uncertainty and a lot of bad news," said Burt White, managing director and chief investment officer of LPL Financial in Boston.
Cypriot leaders held crisis talks on Wednesday to avoid a financial meltdown a day after the country's parliament rejected a tax on bank deposits, which had been proposed over the weekend by European Union officials.
Investors worry that a collapse of the banking system in Cyprus will tighten credit across Europe and become another hurdle in the region's bumpy road out of economic crisis.
The Dow Jones industrial average .DJI gained 55.91 points, or 0.39 percent, to end at 14,511.73, after rising as high as 14,546.82, an intraday record.
The Dow is now up 10.7 percent for the year, while the S&P 500 is up 9.3 percent.
The CBOE Volatility Index .VIX or VIX, Wall Street's favorite barometer of fear, fell 12 percent to end at 12.67 -- its worst daily percentage drop in about three weeks -- after rising sharply for the past two days.
After the bell, shares of Oracle ORCL.O fell 8.2 percent to $32.85 after the world's No. 3 software maker reported revenue that missed expectations.
During Wednesday's regular session, the advance by U.S. stocks followed a recovery in European shares.
"You might have thought the markets would do horribly after the Cyprus parliament vote, but I think that was a good step forward," said Cam Albright, director of asset allocation for Wilmington Trust Investment Advisors in Wilmington, Delaware.
The stock of Lennar, the No. 3 U.S. homebuilder, jumped 4.8 percent to end at $43.40, its highest closing level since June 2007. The PHLX housing sector index .HGX shot up 2.8 percent to 197.17, its highest close since July 2007.
Shares of Adobe Systems Inc (ADBE.O), the maker of Photoshop and Acrobat software, also jumped, a day after the company raised its full-year adjusted earnings forecast. The stock gained 4.2 percent to $42.46.
Among the day's decliners, shares of FedEx Corp (FDX.N) lost 6.9 percent to $99.13, its largest daily percentage drop since September 2011, after the package-delivery company cut its full-year forecast. FedEx reported a 31 percent drop in quarterly profit on Wednesday, citing restructuring costs and weakness in its air freight express business.
The Dow Jones Transportation Average .DJT slipped 0.4 percent, weighed down by FedEx, one of its components.
Volume was roughly 5.9 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.
Advancers outpaced decliners on the NYSE by a ratio of about 3 to 1, while on the Nasdaq, 17 stocks rose for every seven that fell.
(Editing by Jan Paschal)
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