That suggests policymakers are seeing signs that inflation may be cooling as the economy slows with more costly borrowing.
The S&P 500 rose 0.6% to 4,027.26, while the Dow Jones Industrial Average gained 0.3% to 34,194.06. The Nasdaq composite closed 1% higher to 11,285.32.
The Russell 2000 index of smaller companies edged higher, adding 0.2% to close at 1,863.52.
Long-term Treasury yields fell. The yield on the 10-year Treasury, which influences mortgage rates, slipped to 3.69% from 3.76%.
At their Nov. 1-2 meeting, Fed officials expressed uncertainty about how long it might take for their rate hikes to slow the economy enough to tame inflation. At a news conference afterward, Chair Jerome Powell stressed the Fed wasn't even close to declaring victory in its fight to curb high inflation. Other Fed officials in the weeks since the meeting have signaled that additional hikes are still necessary.
The central bank’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March. It has warned that it may have to ultimately raise rates to previously unanticipated levels to cool the hottest inflation in decades.
Wall Street has been closely watching the latest economic and inflation data for any signs that might allow the Fed to ease up on future rate increases. Investors are worried that the Fed could slam the brakes too hard on economic growth and bring on a recession.
Consumer spending and the employment market have so far remained strong points in the economy. That has helped as a bulwark against a recession, but also means the Fed may have to remain aggressive.
Technology stocks and some big retailers helped drive a big share of the gains in the benchmark S&P 500 index Wednesday. Chipmaker Nvidia rose 3% and Target rose 3.5%.
Homebuilders rose broadly following a government report showing that sales of new U.S. homes rose more than expected in October. Lennar gained 1.6% and D.R. Horton rose 2.2%.
Crude oil prices fell 3.7%, which weighed down energy stocks. Hess fell 2.2%.
In energy trading, benchmark U.S. crude lost 11 cents to $77.83 a barrel. Brent crude, the international standard, fell 16 cents to $85.25 a barrel.
In currency trading, the U.S. dollar fell to 138.85 Japanese yen from 139.57 yen. The euro cost $1.0425, up from $1.0399.
AP Business Writers Damian J. Troise and Alex Veiga contributed to this report.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama