U.S. shares ended higher on Wednesday even after minutes from the Federal Reserve's December meeting showed concerns that quicker economic growth under President-elect Donald Trump could require faster interest rate increases to ward off inflation.
U.S. stocks have surged over the past two months on expectations that Trump will stimulate the economy with tax cuts and infrastructure spending and eliminate regulations in the financial industry.
But investors also worry that Trump's measures could stir inflation and push the U.S. central bank to raise rates more aggressively than anticipated.
"Clearly, some of the members on the committee are taking a look at proposed fiscal changes, whether that's tax cuts or infrastructure spending,” said Chris Zaccarelli, Chief Investment Officer for Cornerstone Financial Partners. "It's confirmation of what people were already expecting."
Extremely low interest rates have fuelled a rally of over 200 percent in the S&P 500 since the 2008 financial crisis, and investors worry that raising rates will crimp future increases.
With just over two weeks left before Trump takes office, and the Dow Jones Industrial Average closing in on the 20,000 mark for the first time, investors also say they need to see evidence that his campaign-trail promises will be approved by Republican lawmakers.
The Dow Jones Industrial Average .DJI rose 0.3 percent to end at 19,942.16, while the S&P 500 .SPX gained 0.57 percent to 2,270.75. The Nasdaq Composite .IXIC added 0.88 percent to 5,477.01.
After the bell, Macy's (M.N) cut its 2016 earnings outlook, blaming weakness in handbags and watches. Its stock dropped 8.3 percent in extended trade, while Nordstrom (JWN.N) lost 6 percent and JC Penney (JCP.N) fell 4.4 percent.
Since Trump unexpectedly won his bid for the White House on Nov. 8, the S&P has gained over 6 percent and the Dow has rallied nearly 9 percent.
In Wednesday's session, the materials index .SPLRCM rallied 1.39 percent, its best day in nearly a month.
The S&P 500 consumer discretionary sector .SPLRCD rose 1.33 percent, helped by gains in automakers. Both General Motors (GM.N) and Ford (F.N) rose over 4 percent after posting better-than-expected U.S. sales in December.
Nine of the 11 major S&P 500 sectors were higher, with just the energy .SPNY and telecommunications .SPLRCL sectors in negative territory.
Gilead Sciences (GILD.O) jumped 2.99 percent after the biopharmaceutical company named a new oncology chief.
Comcast (CMCSA.O) rose 1.19 percent after Macquarie raised its price target.
Advancing issues outnumbered declining ones on the NYSE by a 5.84-to-1 ratio; on Nasdaq, a 3.44-to-1 ratio favoured advancers.
The S&P 500 posted 27 new 52-week highs and no new lows; the Nasdaq Composite recorded 160 new highs and 18 new lows.
About 7.0 billion shares changed hands in U.S. exchanges, more than the 6.8 billion daily average over the last 20 sessions.
(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Nick Zieminski and James Dalgleish)