NEW YORK (AP) -- Stocks rose, extending a winning streak, after the Federal Reserve said it will continue to boost the U.S. economy.
The Dow Jones industrial average was up 65 points at 13,315 as of 2 p.m. in New York. It was little changed before the Fed announced its new bond-buying plans at 12:30 p.m. EST.
The Standard and Poor's 500 was up nine points at 1,437. The Nasdaq composite was up eight points at 3,030.
Fed said it will keep spending $85 billion a month on bond purchases to drive down long-term borrowing costs and stimulate economic growth. Of that amount it will spend $45 billion on long-term Treasury purchases to replace a previous bond-buying program of an equal size. The central bank also said it would keep its key short-term interest rate near zero at least until the unemployment rate drops below 6.5 percent or inflation rises to 2.5 percent. Previously, it had said that it expects to keep the rate low until at least mid-2015.
Switching to specific targets for inflation and employment, rather than a time frame, gives financial markets greater clarity about the Fed's intentions, said Bill Stone, chief investment strategist at PNC Asset Management Group.
"It signals, perhaps even more strongly, that they're going to be here until things get better," Stone said.
Wall Street also watched for developments from budget talks in Washington.
In Washington, lawmakers are still trying to reach a deal to avoid the "fiscal cliff," a series of sharp tax increases and spending cuts that will hit the economy in January if Congress and President Barack Obama are unable to thrash out an agreement to reduce the U.S. budget deficit.
House Speaker John Boehner and President Obama spoke on the phone Tuesday, a day after the president offered to reduce his initial demand for $1.6 trillion in higher tax revenue over a decade to $1.4 trillion.
Boehner says "serious differences" remain between him and President Obama in negotiations to avert automatic spending cuts and tax increases that economists fear could send the U.S. economy over a "fiscal cliff." Democrats are resisting GOP demands for steps like raising the Medicare eligibility age.
Both the Dow and the S&P have advanced for the past five days as optimism increased that a deal can be struck. The S&P is trading at its highest in five weeks and has now erased all of its post-election losses. Stocks fell immediately after the vote Nov. 6 on concern that a divided government would struggle to resolve the budget issue.
"There's some optimism that we are going to have some sort of an agreement on the cliff before December 31," said JJ Kinahan, Chief Derivatives Strategist for TD Ameritrade.
Chemicals giant DuPont advanced $1.04 to $44.69 after the company unveiled plans to buy back up to $1 billion of its shares next year and said that profit for this year will reach the high end of its forecasts.
The yield on the 10-year Treasury note rose 2 basis points to 1.68 percent.
Other stocks making big moves:
—Eli Lilly and Co. fell $1.05 to $44.74 after the Indianapolis drugmaker it will conduct the additional, late-stage study of its possible Alzheimer's treatment solanezumab. The move delays a regulatory decision on a drug that flashed potential to help patients with mild cases of the disease.
—Health insurer Aetna Inc. rose $1.71 to $46.19 after the company said late Tuesday that it expects sales and profit to grow next year.
—Berkshire Hathaway's Class A shares jumped $3,959 to $134,953 after the company paid $1.2 billion to repurchase 9,200 shares from the estate of a longtime shareholder. The company's board also approved paying higher prices for future buybacks.