Stocks extended gains into a third session on Tuesday after a May rise in consumer prices, a day ahead of a Federal Reserve monetary-policy decision expected to hold down interest rates.
The Dow Jones Industrial Average closed unofficially 27 points higher, the S&P 500 rose 4 points and the Nasdaq added 16 points.
Sign up for top Business news delivered direct to your inbox.
"We're not going to get something different from the Fed tomorrow. They may change the economic outlook, but they are not going to change what they are doing to long-term interest rates," said Art Hogan, chief market strategist at Wunderlich Securities.
Let our news meet your inbox. The news and stories that matters, delivered weekday mornings.
"Unlike (Bank of England Governor Mark) Carney and (European Central Bank President Mario) Draghi, our Fed is on autopilot," added Hogan of expectations that the U.S. central bank would reduce its monthly asset purchases by another $10 billion, to $35 billion, and reiterate its intention to hold rates at record lows for a considerable period.
The Labor Department's consumer price index jumped 0.4 percent in May, with the report coming as the Fed started a two-day monetary-policy session. An increase in inflation reduces the risk of an extended decline in prices that crimps economic growth, and offers the Fed a reason to maintain their program of scaling back monetary easing.
"The hotter CPI is good news, because we need a modicum of inflation," said Hogan.
"Inflation, it's becoming closer to their target. If that continues to heat up, and goes faster than expected, then the Fed will be stuck," said Nick Raich, chief executive officer at the Earnings Scout.
Still, while Tuesday's report "changes the game a little bit, my guess is it's not enough to have the Fed raise short-term interest rates. We don't think that'll come until 2015," Raich added.
The Commerce Department reported housing starts declined 6.5 percent in May, versus 12.7 percent in April. "The recovery is there, but it's fragile and gradual. Earnings expectations are going down, but at a lesser rate. that's what stocks are picking up on, and why they are near record highs," said Raich.
Treasury prices fell, with the 10-year yield used to figure mortgage rates and other consumer loans rising 5 basis points to 2.647 percent. The dollar gained against the currencies of major U.S. trading partners and dollar-denominated commodities including oil fell.
On the New York Mercantile Exchange, crude futures for July delivery dropped 54 cents to $106.36 a barrel and gold futures for August delivery falling $3.30 to $1,272 an ounce.