U.S. stocks rise after Fed officials’ QE signal

By Polya Lesova, MarketWatch , Victor Reklaitis

NEW YORK (MarketWatch) — U.S. stocks rose on Tuesday, with the Dow industrials and S&P 500 finishing at record highs, after comments from two Federal Reserve officials suggested that the central bank is not close to tapering its bond-buying program.

The Dow Jones Industrial Average DJIA +0.34%  gained 52.30 points, or 0.3%, to end at 15,387.58, notching its 19th consecutive Tuesday rise.

The S&P 500 index SPX +0.17%  climbed 2.87 points, or 0.2%, to 1,669.16, with health care the biggest gainer and telecommunications the biggest laggard among the 10 major industry groups.

The Nasdaq Composite COMP +0.16%  rose 5.69 points, or 0.2%, to 3,502.12.

More than 687 million shares traded on the New York Stock Exchange. Composite volume topped 3.4 billion.

Stocks gained after New York Fed President William Dudley, who is also vice chairman of the Federal Open Market Committee, said that the Fed may adjust the pace of asset purchases up or down depending on the economic outlook and that he was unsure which way the next change will be.

And St. Louis Fed President James Bullard said Tuesday that the central bank should continue with its present bond-buying program and adjust the rate of purchases in view of incoming data on growth and inflation. He said the program is the best policy option and has been effective.

The Fed’s $85-billion-a-month asset-purchase program aims to boost economic growth and lower the jobless rate. The program has buoyed the stock market and its end — if not properly managed — may hurt sentiment among equity investors, potentially triggering a correction in the market.

“Broadly speaking, investors are really waiting to see what Mr. Bernanke is going to say in front of Congress,” said Andrew Wilkinson, chief economic strategist for Miller Tabak. “The next 20 points in the S&P 500 are probably predicated on what he has to say.”

On Wednesday, Federal Reserve Chairman Ben Bernanke will testify before Congress about the economic outlook, and the Federal Open Market Committee will release minutes from its latest meeting.

Stocks on Wall Street finished slightly lower on Monday, after Chicago Federal Reserve President Charles Evans said the Fed’s policy stance remains appropriate and the improving economy still faces headwinds.

Bullish sentiment remains strong on Wall Street. Goldman Sachs raised its year-end target for the S&P 500 to 1,750, and Deutsche Bank recommended staying long equities and added that valuations implied that the S&P 500 could trade as high as 1,800 by year-end.

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Apple CEO Tim Cook testified at a Senate hearing Tuesday about the company’s tax practices.

Drug maker Merck & Co. MRK +4.69%  was the top gainer in the Dow Tuesday, rallying 4.7%.

Also in the Dow, Home Depot Inc. HD +2.54%  climbed 2.5% after the home-improvement retailer reported a jump in quarterly earnings, buoyed by the recovery in the housing market.

J.P. Morgan Chase & Co. JPM +1.40%  shares gained 1.4%. At the bank’s annual meeting in Florida Tuesday, shareholders voted against a proposal on split the CEO and chairman roles currently held by Jamie Dimon.

Shares of Apple Inc. AAPL -0.74%  slipped 0.7%, as Chief Executive Tim Cook defended the tech titan’s tax practices as proper at a Senate hearing. A Senate panel has said Apple avoided corporate-income taxes on billions of dollars in overseas income over the past four years. Read MarketWatch’s blog on the Apple hearing.

Polya Lesova is MarketWatch's New York deputy bureau chief. Follow her on Twitter @PolyaLesova. Victor Reklaitis is a New York-based markets reporter for MarketWatch.