NEW YORK (TheStreet) -- U.S. stocks rallied to record levels Wednesday after the Federal Reserve eased concerns that the central bank could initiate its first rate hike before the summer.
The Dow Jones Industrial AverageI:DJI rose 0.15% to settle at 17,156.85 after knocking out the prior session's intraday record with a fresh high of 17,221.11. The S&P 500undefined was higher by 0.13% to 2,001.57. The NasdaqI:IXIC was up 0.21% to 4,562.19.
"The Fed is very, very comfortable with the risk of being possibly behind the curve vs. inflation," said Erik Davidson, San Francisco-based deputy chief investment officer for Wells Fargo. "They will wait until they see the whites of the eyes of inflation before they start to lift off rates."
Though it wasn't a big surprise, Wall Street liked the fact that the Federal Reserve will continue its near-zero interest rate policy for a "considerable time." The statement also made plenty of references to slack in the labor market and less-than-target inflation levels, also helping to reduce expectations of a first-quarter rate hike and increasing the anticipation of sustained tailwinds from Fed monetary stimulus.
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After the post-Fed statement pop, stocks continued to extend gains with Fed Chair Janet Yellen's muted reaction to a recent San Francisco Fed paper suggesting that there has been a divergence between the market's views and the views of the committee -- resulting in investors underestimating the possibility that the central bank could hike rates earlier than expected.
"I don't frankly think it's completely clear that such a gap exists," said Yellen. "To the extent there is a gap -- one reason for it is could be that the market and participants have different views on the evolution of economic conditions. So differences in the probabilities of different outcomes."
"The committee will try to learn from market views," she added.
Data released before the Fed statement showed the National Association of Home Builders Housing Market Index for September jumping 4 points to 59. Homebuilder confidence hit the highest level in nearly nine years.
The CPI for August fell 0.2% compared with economists' calls for a flat reading. The index rose 0.1% in July.
In corporate headlines Wednesday, Family Dollar Stores' (FDO) board unanimously recommended that Family Dollar shareholders reject Dollar General's (DG) - Get Dollar General Corporation Report offer and unanimously reaffirmed its support for a deal with Dollar Tree (DLTR) - Get Dollar Tree, Inc. Report . Family Dollar fell 0.05%. Dollar General dipped 0.41%. Dollar Tree was up 0.83%.
Endo International (ENDP) - Get Endo International Plc Report made an unsolicited offer for Auxilium Pharmaceuticals (AUXL) that values Auxilium at $28.10 a share, a 31% premium to Auxilium's closing price on Tuesday of $21.52. Auxilium surged 44.89%. Endo rose 4.73%.
Sony (SNE) - Get SONY GROUP CORPORATION SPONSORED ADR Report said Wednesday it expects its annual loss to widen to $2 billion and has canceled dividends for the first time in more than half a century after writing down the value of its troubled smartphone business. Sony lost 6.77%.
FedEx (FDX) - Get FedEx Corporation Report rose 3.27% after the shipping giant reported earnings growth of 37% to $2.10 a share on a revenue increase of 6% to $11.7 billion amid solid volume and sales increases at FedEx Freight. Analysts expected $1.96 in EPS on revenue of $11.48 billion.
FedEx said on Tuesday it would raise U.S. rates for express, ground and home-delivery shipments in January by an average of 4.9%.
General Mills (GIS) - Get General Mills, Inc. (GIS) Report shed 4.42% after the packaged goods company posted a 25% drop in quarterly net income to $345.2 million. Revenue also slipped as the company said it was facing a tough U.S. market environment.
-- By Andrea Tse and Kurumi Fukushima in New York