MARKET SNAPSHOT: U.S. Stocks Rally; Dow Gains Most In 5 Weeks

By Anora Mahmudova, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks rebounded on Wednesday from the previous day's losses and ended the session with solid gains, led by advances in the consumer discretionary and energy sectors.

The main benchmarks extended gains after the release of the minutes from the Federal Open Market Committee meeting, which showed officials considering options on exiting from ultra-loose monetary policy and a decision to remain flexible.

The S&P 500 index (SPX)closed 15.20 points, or 0.8%, higher at 1,888.03. The Dow Jones Industrial Average (DJI) gained 158.75 points, or 1%, to 16,533.06, the best percentage gain in 5 weeks. The Nasdaq Composite (RIXF) ended the day up 34.65 points, or 0.9%, at 4,131.54.

The Russell 2000 index swung wildly Wednesday, but managed to close modestly higher, gaining 5.79 points, or 0.5% to 1,103.69, according to preliminary data from FactSet.

Read the recap of MarketWatch's live blog of today's stock-market action.

John Canally, investment strategist and economist at LPL Financial says the minutes presented a Goldilocks scenario for equity markets.

"The key takeaway from the Fed minutes for the stock markets was the fact that the Fed faces an ongoing trade-off between unemployment and inflation. As inflation is still very low, the Fed can continue to accommodate to target even lower unemployment situation," Canally said.

"We think that the bond market will be proven wrong about the current economy," he added.

Federal Reserve officials examined "several approaches" for the eventual tightening of monetary policy but only decided to be flexible, according to the minutes from the April meeting released Wednesday that suggested that the time for higher interest rates is drawing closer. Also read: Fed's easy-money strategy won't be easy to end, official says

Besides the FOMC minutes, several Fed officials delivered speeches, including Fed Chairwoman Janet Yellen, who delivered the commencement speech at Yankee Stadium to New York University students.

Retail in spotlight

Retail companies were in the spotlight again with several earnings releases ahead of the opening bell.

Shares of Tiffany (TIF) jumped 9.2% after the luxury-jewelry maker reported sales and earnings that beat estimates, and lifted its outlook for fiscal 2015.

Target (TGT) shares gained 1% after the discount chain posted adjusted quarterly earnings of 70 cents a share, versus forecasts for 71 cents, on sales that roughly matched expectations. On Tuesday, the company replaced the president of its struggling Canadian business.

Retail stocks were hit on Tuesday, contributing to broad losses, after disappointing earnings from TJX Cos. (TJX) and Staples Inc. (SPLS) among others.

Home-improvement retailer Lowe's (LOW) on Wednesday reported first-quarter earnings that came in ahead of analyst expectations by one penny a share, but sales missed estimates. Lowe's also lifted its per-share earnings view for 2015. Shares closed down 0.2%.

PetSmart Inc. (PETM) dropped 8.3% after it reduced its outlook as it delivered its quarterly results.

Shares in American International Group Inc. (AIG) rose 1.9% after Goldman Sachs analysts upgraded the stock to buy from neutral and raised the price target to $63.

Michael Nannizzi and his team wrote: "We believe AIG will generate [systematically important financial institution]-high capital and is best positioned among SIFI candidates to deploy capital accretively into its core businesses if large-scale buybacks aren't a near-term option."

Netflix Inc (NFLX) shares rose 5.1% after the Internet television network announced plans to expand across Europe.

U.K. stocks fall, European stocks gain modestly

In overseas markets, European stocks gained modestly, but U.K. stocks fell for a third day. Asian stocks posted moderate losses across the board.

Gold for June delivery (GCM4) lower on Wednesday, at their lowest close in early two weeks, as a climb in U.S. equities lured investors away from the precious metal.

Oil for July delivery (CLN4) topped $104 a barrel on Wednesday to settle at their highest level in a month after a U.S. government report showed a drop in weekly crude inventories that was much bigger than the market expected..

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