Wall Street's three main stock indexes closed higher on Wednesday as investors digested Federal Reserve meeting minutes ahead of September inflation data and earnings reports, but Alphabet shares fell on fears the U.S. would break up Google.
Shares in market heavyweight Alphabet fell after the U.S. Department of Justice said it may ask a judge to force Google to divest parts of its business. These include its Chrome web browser and its Android operating system, to curtail its search monopoly.
Stocks held roughly steady right after the Fed's September meeting minutes showed a "substantial majority" of officials supported an outsized half-point rate cut. However, there was broader agreement that the move would not commit the Fed to any particular pace of cuts in the future.
Traders were last pricing in an 80 per cent chance of a 25-basis-point reduction in borrowing costs and a 19 per cent probability the Fed keeps rates on hold, according to CME's FedWatch.
"The minutes confirmed what we'd thought all along and relieved investors. There was a debate about the 50 basis point cut, meaning that it wasn't a sweeping consensus that we needed to do a drastic 50 basis point cut," said Lindsey Bell, chief strategist at 248 Ventures in Charlotte, North Carolina.
The market is awaiting the Consumer Price Index inflation report due on Thursday morning and the third-quarter corporate earnings season, which kicks off in earnest with some of the biggest U.S. banks reporting on Friday.
"The minutes were also further confirmation that the Fed believes they've won the fight on inflation. So tomorrow's CPI number shouldn't be too much of a surprise," said Bell.
Trading has been choppy this week, with investors adjusting rate-cut expectations after a surprisingly strong September jobs report suggested a U.S. economy that is in better shape than investors had feared.
"There's an air of optimism in the market since the Friday jobs report. Investors remain optimistic on the soft- to no-landing scenario," she said, referring to the possibility that the economy might even avoid a mild recession.
According to preliminary data, the S&P 500 gained 40.45 points, or 0.70 per cent to end at 5,791.58 points, while the Nasdaq Composite gained 108.91 points, or 0.60 per cent, to 18,291.82. The Dow Jones Industrial Average rose 432.48 points, or 1.03 per cent, to 42,512.85.
While most of the S&P 500's 11 industry sectors rose, concern about Google cast a shadow on communications services .
"News about antitrust initiatives create worries about what that means for the technology sector broadly and specifically the most dominant players," said Daniel Morris, chief market strategist for asset management at BNP Paribas.
Investors were also monitoring for potential damage from Category 5 Hurricane Milton, due to make landfall in Florida on Wednesday.
Among prominent stocks, Boeing shares fell after talks between the company and its key manufacturing union broke down.
Among gainers, shares of Norwegian Cruise Line outperformed the broader market sharply after Citi upgraded its rating to "buy." Its peers Carnival and Royal Caribbean Cruises also rose.
Shares of Arcadium Lithium soared after Rio Tinto said it would acquire the miner for US$6.7 billion.
U.S.-listed shares of Chinese firms dropped as investors continued to question if China would announce new stimulus measures. Shares in Alibaba Group and PDD Holdings declined.