Gains in healthcare and media stocks lifted Wall Street on Wednesday, although banks dropped ahead of a widely expected interest rate hike by the U.S. Federal Reserve.
With a third rate hike all but certain, and chances of a fourth increase in December firming after robust consumer confidence data on Tuesday, investors are keen to know whether the Fed will officially end the era of easy money.
Some analysts expect a more aggressive tilt, whether in the policy statement at 2 p.m. ET (1800 GMT), the accompanying economic and interest rate projections, or at Fed Chairman Jerome Powell's press conference.
Financial stocks overall were 0.44 percent lower, with bank shares faring marginally worse. Only Citigroup and M&T Bank eked out gains.
"If the Fed raises short-term interest rates, that serves to flatten the yield curve and banks want a steeper yield curve," said Linda Duessel, senior equity strategist at Federated Investors, in Pittsburgh, Pennsylvania. The yield curve has been flattening in the run up to the Fed meeting.
The stock market has enjoyed a boom period and is at record levels. But as rates rise, equities face rising competition for investors' funds not only from bonds, but also from cash, which is now the most attractive it has been in about a decade.
"We're a little surprised that stocks are up ahead of the Fed announcement and that is a positive sign. The markets are thinking the Fed is going to be a little bit more dovish," said John Augustine, chief investment officer at Huntington Private Bank, in Columbus, Ohio.
The health sector rose 0.86 percent, as biotechs led the gains, while the newly-formed communications services sector gained 0.79 percent, boosted by media companies, including Disney.
As a result, the Dow Jones Industrial Average was up 72.50 points, or 0.27 percent, at 26,564.71 at 13:09 a.m. EDT.
The S&P 500 was up 8.53 points, or 0.29 percent, at 2,924.09 and the Nasdaq Composite was up 31.99 points, or 0.40 percent, at 8,039.46.
The interest-rate sensitive utilities and real estate sectors fell 0.20 percent and 0.29 percent, respectively.
In health stocks, Alexion Pharmaceuticals rose 6.1 percent after a $1.2 billion deal to buy privately held Syntimmune. Among biotechs, Biogen advanced 2.9 percent.
Twenty-First Century Fox rose 1.5 percent after agreeing to sell its stake in Sky to Comcast, which gained 0.5 percent. Disney, which is buying Fox, jumped 2.1 percent.
Nike fell 1.2 percent, the most on the Dow, as the sportswear maker stopped short of raising its financial forecast.
IBM jumped 2.5 percent after UBS upgraded the stock to "buy".
Advancing issues outnumbered decliners by a 1.12-to-1 ratio on the NYSE and a 1.01-to-1 ratio on the Nasdaq.
The S&P index recorded 28 new 52-week highs and 12 new lows, while the Nasdaq recorded 55 new highs and 51 new lows.