Dow setting records again

NEW YORK (CNNMoney.com) -- Stocks rose Wednesday, with the Dow Jones industrial average ending at a record high, after the Federal Reserve held a key short-term interest rate steady, as expected, and again said that inflation was its main worry going forward.

The Dow (up 53.80 to 13,362.87, Charts) added 0.4 percent and ended at a new all-time high. The blue-chip barometer had briefly hit a record intraday high of 13,369.29 before retreating. The broader S&P 500 index (up 4.86 to 1,512.58, Charts) added 0.3 percent, while the tech-fueled Nasdaq composite (up 4.59 to 2,576.34, Charts) gained a few points.

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Bond prices slumped, raising the corresponding yields. The dollar gained versus the euro and was little changed versus the yen. Oil and gold prices fell.

The major gauges had been on both sides of unchanged throughout the session as investors weighed Cisco's earnings and lower oil prices ahead of the conclusion of the Fed meeting.

But stocks turned higher in the last 90 minutes of the session as investors breathed a sign of relief that the Fed meeting and statement brought few surprises.

"Given the way the market has been performing in recent weeks, I don't think it would have mattered what the Fed said in the statement," said Michael Sheldon, chief market strategist at Spencer Clarke. "The bias of the market continues to be higher, with investors remaining in a buying mood."

Stocks have risen steadily over the last five weeks, with the Dow carving out its longest up streak in 80 years, closing higher in 24 out of 27 sessions through Monday.

The S&P 500 is now within shouting distance of its all-time high of 1,527.46 hit in March 2000, while the Nasdaq composite is at a more than six-year high.

The advance has been driven by stronger-than-expected earnings, the glut of corporate deals and an increase in company stock buyback plans.

The earnings reporting period is winding down, but the deals and stock buybacks should continue to support stocks going forward, analysts say.

Nonetheless, after the recent run, stocks could be vulnerable, particularly as investors move into the so-called 'sell in May and go away' period, said Russell Lundeberg Jr., chief investment officer at Barrett Capital Management, referring to the typically choppy summer months.

"People can sometimes get nervous at this point (in the year)," he said.

But he said the fundamentals of the market are positive and stock valuations seem to be reasonable at home and abroad, factors that should counter any seasonal weakness.

EchoStar (Charts, Fortune 500) and Viacom (Charts) are among the companies due to report quarterly earnings Thursday morning, while economic reports include the March trade balance and the weekly jobless claims.

The central bank's policymakers opted to keep the fed funds rate unchanged at 5.25 percent for the seventh meeting in a row, as expected. The Fed's closely watched statement was little changed from the last meeting in March, with the bankers saying again that the main policy concern remains the risk of inflation not moderating as they expected.

Bond prices fell as investors worried the Fed might raise rates, making their holdings less attractive, while some traders had bet the Fed would acknowledge recent signs that inflation pressure had eased, said Wan-Chong Kung, senior fixed-income portfolio manager at First American Funds.

But for the stock market, the statement was perhaps less hawkish about inflation than feared, she said, and that may be why stocks were able to move higher.

The bankers acknowledged the economic slowdown more directly this time than in March, saying growth slowed in the first part of the year. But they also reiterated that the adjustment in housing is ongoing and that the economy should expand at a moderate pace over the next few quarters.

The statement was pretty backward looking in terms of growth, and not a surprise for the market, Kung said. "It seemed fair and reasonable to say, yeah, things have slowed down."

Overall, the statement seemed to "discourage any aggressive pricing of easing odds," in the short term, King added, meaning rates probably aren't going anywhere anytime soon.

Treasury prices slipped after the Fed announcement, boosting the yield on the 10-year note to 4.66 percent from 4.62 percent late Tuesday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar gained against the euro and yen following the decision.

In corporate news, two marquee companies reported quarterly earnings after the close Tuesday.

Cisco Systems (down $1.85 to $26.51, Charts, Fortune 500) reported higher quarterly sales and earnings that topped estimates and issued an in-line forecast for the current quarter. But at the end of a strong earnings reporting period, investors were perhaps looking for more. Cisco shares fell 6.5 percent Wednesday.

Walt Disney (Charts, Fortune 500), a Dow component, reported higher quarterly earnings that topped estimates. However, the media leader also said sales increased just 1 percent, missing analysts' expectations. Shares fell 1.2 percent Wednesday.

Intel (up $0.32 to $22.47, Charts, Fortune 500), JP Morgan (up $0.75 to $53.20, Charts, Fortune 500), Honeywell (up $1.02 to $56.81, Charts, Fortune 500) and Caterpillar (up $1.32 to $74.75, Charts, Fortune 500) were among the stocks lifting the Dow.

Alltel (up $1.36 to $66.56, Charts, Fortune 500) is being pursued by three private equity groups in a deal that could value the rural telecom company at up to $30 billion, The Wall Street Journal reported. Alltel shares gained 2.1 percent.

Shares of Rio Tinto (up $31.62 to $296.27, Charts) jumped on reports that larger rival BHP Billiton (up $2.51 to $53.41, Charts) is looking to buy the miner in a deal that could be worth more than $100 billion.

Shares of Dendreon (down $11.41 to $6.33, Charts) slumped about 64 percent in unusually active Nasdaq trading after U.S. regulators said they needed more information before they could approve the biotech's cancer vaccine. One month ago, the U.S. Food and Drug Administration's advisory panel recommended approval of the drug.

Market breadth was positive. On the New York Stock Exchange, advancers topped decliners 5 to 3 on volume of 1.56 billion shares, while on the Nasdaq, winners beat losers 8 to 7 on volume of 2.18 billion shares.

U.S. light crude oil for June delivery fell 79 cents to settle at $61.47 a barrel on the New York Mercantile Exchange after a government report said gasoline supplies rose last week, diminishing worries about any supply shortage ahead of the start of the summer driving season.

COMEX gold for June delivery fell $4.90 to settle at $682.50 an ounce.