Fed Gives Stocks a Boost

The year-over-year change in inflation eased to 2.1% from 2.2% in the third quarter, but still remained a bit outside the Fed's comfort zone.

The GDP report is the first of three that will ultimately be released on the fourth quarter.

Meanwhile, the Chicago purchasing managers' index dropped to a reading of 48.8, below the consensus 52.0 and the lowest reading since April 2003. Though the Chicago PMI specifically discusses manufacturing activity in the Midwest, it's closely watched for clues about the overall stability of the nation's factory sector.

Another report from the Commerce Department said that construction spending fell 0.4% in December, whereas no change had been anticipated.

Elsewhere, crude prices continued Tuesday's big rally, despite a bearish inventory report from the Energy Department. Oil futures rose $1.17 to close at $58.14 a barrel.

The latest inventory report from the Energy Department showed that crude stores increased by 2.7 million barrels last week, distillate supplies rose by 2.6 barrels, and gasoline stocks climbed by 3.8 million barrels.

On the corporate side, Bristol-Myers Squibb (BMY Quote) has hired investment bankers, a possible signal that it is in fact exploring a merger, according to a published report. The Financial Times had the news, following its own article earlier this week that the company was mulling a deal with Sanofi-Aventis (SNY Quote).