Stocks rose on Wednesday, with the Dow hitting a recovery high, as the Fed's renewed promise of low interest rates was underscored by a benign inflation reading.
Government data released before the market's open showed a steeper-than-expected drop in the February Producer Price Index, pointing to scant inflation pressure and further supporting the ultra-low interest rates that have fueled a rally in equities.
The Dow industrials rose on Tuesday for a sixth straight day to hit a 17-month high while the S&P 500 and the Nasdaq Composite also hit fresh multi-month highs.
Investors like knowing where rates are going to be for at least the next three months, and knowing we have that stable environment to look forward to is what's lifting stocks, said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.
Coal miner Massey Energy Co
The Dow Jones industrial average <.DJI> gained 41.12 points, or 0.38 percent, to 10,727.10. The Standard & Poor's 500 Index <.SPX> rose 6.46 points, or 0.56 percent, to 1,165.92. The Nasdaq Composite Index <.IXIC> added 14.08 points, or 0.58 percent, to 2,392.03.
Investors expect the S&P 500 to rise 10 percent during 2010, according to a quarterly Reuters poll published Wednesday.
Hartford Financial Services Group Inc
Discover Financial Services
Federal Reserve Chairman Ben Bernanke will defend the central bank's role in supervising smaller banks, which it would lose in regulatory reform proposals, in a 2 p.m. (1800 GMT) hearing before the House of Representatives Financial Services Committee.
(Reporting by Ryan Vlastelica; Editing by Jan Paschal)