The blue-chip Dow also boasted a record closing level and drew closer to the 40,000 milestone. All three of Wall Street's major indexes hit intraday records.

Tepid U.S. Consumer Price Index (CPI) data for April led traders to raise bets that the Fed will cut its policy rate in September and December.

"It's a relief we didn't have a fourth hot CPI report," said Carol Schleif, chief investment officer at the BMO family office in Minneapolis. "Clearly markets liked that the inflation numbers looked softer. Retail sales came in softer. It's pretty clear evidence that the economy came off the boil and is operating at a more sustainable pace."

Other data released on Wednesday showed U.S. retail sales were unexpectedly flat in April as higher gasoline prices pulled expenditure away from other goods, indicating that consumer spending was losing momentum.

According to preliminary data, the S&P 500 gained 61.99 points, or 1.18%, to end at 5,308.67 points, while the Nasdaq Composite gained 232.85 points, or 1.41%, to 16,744.03. The Dow Jones Industrial Average rose 357.78 points, or 0.90%, to 39,911.81.

The Nasdaq scored its second record close in as many days.

Equities built on Tuesday's gains, when Fed Chair Jerome Powell's assessment of U.S. growth, inflation and the interest rate outlook reassured investors after hotter-than-expected producer prices for April.

Stocks have rallied so far this year on better-than-expected first-quarter earnings and expectations that the Fed will be able to cool inflation without damaging growth and eventually transition to cutting interest rates.

Among megacap stocks, Nvidia, Microsoft and Apple all advanced.

In earnings, Walmart was expected to provide more color on consumer spending when it reports results on Thursday. The retail giant's shares underperformed.

Retail investor darling GameStop snapped this week's sharp rally driven by "Roaring Kitty" Keith Gill, a central figure behind the 2021 meme stock frenzy, who posted bullish comments on social media platform X.

Other meme stocks such as AMC Entertainment and Koss Corp also fell.