March 20, 2013 at 3:50 PM ET
Stocks finished higher Wednesday, wiping out most of the past week's losses, after the Federal Reserve reaffirmed its policies on bond purchases and record-low interest rates and as investors shrugged off concerns over Cyprus.
"Count on the Fed to prop up this market for a bit longer—I think Bernanke along with investor dissatisfaction for other asset classes have been the main reasons for this remarkable resilience in the equity market," said Uri Landesman, president at Platinum Partners.
The Dow Jones Industrial Average closed higher, led by American Express and Coca-Cola, after earlier hitting a fresh intraday high for the eighth time this month at 14,546.82. The blue-chip index is up nearly 11 percent so far this year.
The S&P 500 and the Nasdaq also ended in positive territory. The S&P 500 came within 4 points of its all-time closing high. The S&P and Nasdaq are on pace for their fifth month of gains. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, tumbled near 12.
Most key S&P sectors finished positive territory, led by consumer discretionary and consumer staples.
"Stocks remain attractive alternatives to fixed income and as long as that relationship stays in place, we're going to be in the cycle of buying dips in the market versus selling the rally," said Dan Veru, CIO Palisade Capital Management.
The Federal Reserve Open Market Committee indicated that it will leave interest rates unchanged near zero continue buying $85 billion in debt each month until unemployment falls to 6.5 percent and inflation rises to a 2.5 percent growth rate.
With the economic recovery continuing at a moderate pace, investors have been watching for indications that the central bank might start pulling back on its bond buying. (CNBC Explains:Federal Reserve Open Market Operations)
"The labor market has shown signs of improvement in recent months but the unemployment rate remains elevated. Inflation is expected to remain low and fiscal policy has become somewhat more restrictive," said Bernanke in a news conference following the FOMC decision. "In light of this outlook and following a review of the efficacy and cost of additional asset purchases, the committee today reaffirmed its asset purchase program and its federal funds guidance."
The central bank expects the U.S. economy to grow by 2.3 percent and 2.8 percent this year, by 2.9 percent and 3.4 percent in 2014 and by 2.9 percent and 3.7 percent in 2015. Those forecasts were revised slightly lower compared to estimates in December.
Meanwhile, Haruhiko Kuroda, the new head of the Bank of Japan, is scheduled to hold his first press conference on Thursday. Shortly after 2 p.m. ET, the Japanese press leaked that Kuroda would pledge "bold monetary easing both in terms of quantity and quality."
In Europe, Cypriot leaders held crisis talks on Wednesday to avert financial meltdown after the country's lawmakers overwhelmingly voted against a controversial EU bank bailout deal on Tuesday. Stocks were under pressure in the last few days as worries over Cyprus and possible contagion to other eurozone nations curbed risk appetite.
(Read More: Don't Count Cyprus Out of the Euro Just Yet: Traders)
European markets finished narrowly mixed as investors watched to see if Russia, rather than Europe, would come to the aid of Cyprus.
Cyprus's finance minister Michael Sarris, who is in Moscow for talks with Russia, told CNBC that the country was now "looking beyond" extending an existing loan agreement with Russia, prompting speculation that Russia could come to Cyprus's financial aid.
Meanwhile, banks in Cyprus will remain closed until next Tuesday.
Model N surged more than 30 percent in its market debut on the NYSE after the software maker priced 6.7 million shares at $15.50, above the expected $12.50 to $14.50 range. The company trades under the symbol "MODN."
Apple dipped near $500 a share after Canaccord Genuity cut its target price on the iPhone maker to $600 from $650.
Caterpillar dropped after the heavy-equipment maker posted a 13 percent decline in global sales to dealers for three months through February.
Adobe Systems rallied to lead the S&P 500 gainers after the computer software maker lifted its full-year earnings forecast and posted better-than-expected quarterly results. Separately, the company announced its chief technology officer Kevin Lynch will leave to take a job at Apple. At least three brokerages raised their price target on the company.
Lennar edged higher after the home builder reported earnings that exceeded Wall Street estimates as lower interest rates and rising rents increased home sales.
Best Buy climbed after Credit Suisse reinstated its coverage on the company with an "outperform" rating.
Zynga plunged after Bank of America Merrill Lynch cut its rating on the social game services company to "neutral" from "buy."
On the economic front, weekly mortgage applications fell for a second week as interest rates climbed to a seven-month high, according to the Mortgage Bankers Association.
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