Dow, S&P 500 top 17K, 2000 on Fed news

Stocks strengthened Thursday as investors focused on the Federal Reserve's rate hike intentions after the release of minutes from the Fed's latest policy meeting.

The three major benchmarks, mixed ahead of the 2 p.m. ET release, moved solidly into the black as the afternoon wore on.

"Investors will be dissecting the minutes . . . with a fine-toothed comb," said Karee Venema, an analyst at Schaeffer's Investment Research, before the release.

The Dow Jones industrial average was up about more than 125 points, or 0.8% and back above 17,000. The Standard & Poor's 500 index was up 0.8% and took out the 2000 mark Wall Street had been hopoing for. The Nasdaq composite index — negative for all of the morning and gradually climbing after the Fed news — is up 0.4%.

The Dow and S&P 500 had earlier saw-toothed above and below the break-even mark.

But after reviewing the Fed minutes, in which the central bank said it was still worried about low inflation readings, stocks rallied as the odds for an interest rate hike this year shrank some more.

U.S. stocks, which have rallied sharply off their August lows, are still grappling with the aftermath and uncertainty caused by the market's first 10% price correction in four years. Wall Street is trying to gauge whether the recent rally signals the current selling has been exhausted and whether the uptrend that has been in place for 6 1/2 years is ready to resume.

The upcoming third-quarter earnings season, which unofficially kicks off today after the closing bell when aluminum giant Alcoa (AA) reports results, could be a key to the market's next move.

"Equities appear to be at the crossroads of near-term uncertainty and longer-term appeal," Terry Sandven, chief equity strategist at U.S. Bank Wealth Management told clients in a report. "Whether the current market uncertainty and lackluster returns merely reflect a soft patch in an ongoing bull market or the start of a bear trend will likely depend on the future pace of global growth and company earnings."

The S&P 500 is now trying to climb back above the key 2000 level, a price level that is now viewed by many Wall Street chart-watchers as a key ceiling, that if broken to the upside would provide additional proof that the market low hit in late August has been successfully re-tested, and that the uptrend is back in force.

Chinese stocks jumped 3% Thursday after markets reopened following a week-long holiday. The "rally is partly driven by the positive economic data released over the break, such as a slightly better than expected official manufacturing" index, said Gerry Alfonso, trading director at Shenwan Hongyuan Securities in Beijing.

Other Asian markets were lackluster — Japan's Nikkei 225 index fell 1 % while Hong Kong's Hang Seng index dropped 0.7%.

European markets were mixed as Germany's DAX index rose 0.2% and France's CAC 40 was up 0.2%. London's FTSE 100 index gained 0.6%.

U.S. stocks rose Wednesday, with the S&P 500 nearing the 2000 mark and the Dow gaining 122 points.

Contributing: Associated Press

Jim Bianco, founder and president of Bianco Research, discusses the outlook for Federal Reserve monetary policy and the U.S. stock market with Bloomberg's Betty Liu and Mike Regan on "Bloomberg Markets." Bloomberg

Adam Shell and Jane Onyanga-Omara

Dow, S&P 500 top 17K, 2000 on Fed news