U.S. stocks rose on Wednesday as a benign reading on the November Consumer Price Index bolstered expectations that the Federal Reserve will keep its accommodative monetary stance to foster an economic recovery.
Banking stocks rallied, with an S&P index of financial services stocks <.GSPF> up 1 percent after sources said global banking regulators will give banks a grace period before enforcing more stringent capital rules.
Another winning sector was energy, whose components jumped with oil prices after data showed U.S. crude inventories fell more than expected last week. U.S. oil futures prices shot above $73 a barrel. Chevron Corp
Technology shares also stood out, with the semiconductor index <.SOXX> up 2.2 percent.
The Labor Department said the overall Consumer Price Index rose 0.4 percent on a seasonally adjusted basis after an unrevised gain of 0.3 percent in October. When volatile food and energy costs were stripped out, core CPI was unchanged in November from the previous month.
People are starting to believe that at this point, the Fed is not going to do anything; they'll reiterate a positive stance, said Doug Roberts, chief investment strategist at Channel Capital Research, in Shrewsbury, New Jersey. The CPI data was pretty good.
The Dow Jones industrial average <.DJI> rose 25.25 points, or 0.24 percent, to 10,477.25. The Standard & Poor's 500 Index <.SPX> climbed 6.21 points, or 0.56 percent, to 1,114.14. The Nasdaq Composite Index <.IXIC> gained 14.39 points, or 0.65 percent, to 2,215.44.
With the Fed's statement due this afternoon, the S&P 500 is
up about 65 percent from its 12-year closing low on March 9.
The Fed is set to issue its statement assessing the economic outlook by 2:15 p.m. (1915 GMT) after it concludes a two-day policy meeting -- the last of 2009.
Even though Fed Chairman Ben Bernanke reiterated more than a week ago that interest rates will stay low for an extended period, investors want to see how the Fed's latest thinking is evolving, particularly after November's surprisingly upbeat non-farm payrolls data.
Investors will parse the Fed's statement more closely to determine how the Fed will balance inflation risks with a need to ensure that the nascent recovery is not derailed by increases in borrowing costs for consumers and businesses.
Banking and financial services stocks climbed after sources said global regulators will give banks a grace period before forcing them to implement stricter capital rules, easing concerns they might need to issue stock in the near future. [ID:nTOE5BF01O]. Wells Fargo & Co shares advanced 1.3 percent to $25.99, while JPMorgan Chase & Co added 1.1 percent to $41.32.
The U.S. dollar index <.DXY> slipped 0.3 percent, adding to the stock market's positive tone and lifting commodity prices across the board. The S&P materials sector index <.GSPM> was up 1.4 percent. U.S. Steel Corp
In the tech sector, shares of Advanced Micro Devices Inc
The news on CPI brought some relief after Tuesday's data showed that the U.S. Producer Price Index and industrial production rose faster than expected last month, sparking inflation jitters.
In another economic report, housing starts rose 8.9 percent to a seasonally adjusted annual rate of 574,000 units in November, which fell short of the market's expectations, but it was still the largest percentage gain since May.
Building permits increased 6 percent in November to a seasonally adjusted annual rate of 584,000 units, which was their fastest pace since November 2008.
Home builders' shares rallied on the housing data, driving the Dow Jones U.S. home construction index <.DJUSHB> up 4 percent.
(Reporting by Ellis Mnyandu; Editing by Jan Paschal)