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NEW YORK (Reuters) - U.S. stocks rose along with bond prices on Wednesday as investors prepared for the European Central Bank to signal an extension of its bond-buying at its Thursday meeting.
The euro gained slightly against the dollar as investors also waited for possible indications on when the ECB will begin paring bond purchases under its quantitative easing programme.
Prices on longer-dated U.S. Treasuries rose following a large block purchase of 10-year Treasury note futures after disappointing overseas data pushed foreign yields lower.
"There's a little bit of a bond market rally going on certainly in the long end so that means dividend stocks feel better," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. "People are short covering ahead of the ECB announcements tomorrow. Lower rates on the continent is constructive for growth and good for equity."
The S&P 500's telecommunications .SPLRCL and REIT .SPLRCREC sectors were the biggest drivers for the U.S. benchmark index while healthcare stocks .SPXHC were the biggest drag after President-elect Donald Trump said in an interview he would bring down drug pricing.
The Dow Jones industrial average .DJI was up 265.77 points, or 1.38 percent, to 19,517.55, the S&P 500 .SPX had gained 23.71 points, or 1.07 percent, to 2,235.94 and the Nasdaq Composite .IXIC had added 55.52 points, or 1.04 percent, to 5,388.53.
Oil prices fell on bearish U.S. petroleum inventory data and doubts that production cuts promised by Organization of the Petroleum Exporting Countries (OPEC) and Russia would be enough to drain a global crude glut.
Brent crude LCOc1, the international benchmark, fell 85 cents to $53.10 a barrel. U.S. light crude CLc1 was down $1.07 at $49.07 a barrel.
Earlier on the pan-European STOXX 600 index rose 0.9 percent while Italy's FTSE MIB share index .FTMIB gained 2 percent to hit its highest point since May as the country's banking stocks continued a rally.
Shares in Monte dei Paschi, Italy's oldest bank, rose about 10.8 percent (BMPS.MI), and an index of Italian lenders' shares .FTIT8300 rose 4.5 percent to its highest since June after jumping 9 percent in the previous session.
Reuters reported on Tuesday that Italy was preparing to take a 2-billion-euro controlling stake in Monte dei Paschi as prospects of a private funding rescue faded following Prime Minister Matteo Renzi's decision to resign after voters rejected his constitutional reform proposals.
The euro EUR= edged up 0.4 percent to $1.076. The dollar index .DXY, which measures the U.S. currency against a basket of six major peers, was down 0.3 percent.
“I don’t think in a real sense the ECB can afford to be hawkish,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto. “Growth is picking up somewhat, but generally speaking inflationary pressures and inflationary expectations are still very, very weak and that’s their mandate.”
Benchmark 10-year Treasury note yields were down 4 basis points from late on Tuesday to 2.354 percent. They had reached 2.492 percent on Dec. 1, their highest level since July 2015, according to Reuters data. US10YT=RR
Additional reporting by Richard Leong and Karen Brettell in New York, Yashaswini Swamynathan in Bengaluru, Nigel Stephenson in London, Hideyuki Sano in Tokyo and John Geddie, Jemima Kelly, Christopher Johnson in London; Editing by Nick Zieminski and Meredith Mazzilli