U.S. stocks rose, erasing earlier losses, after Federal Reserve Bank of St. Louis President James Bullard said the central bank should continue its bond buying to boost growth that is slower than expected.

The Standard & Poor's 500 Index gained 0.5 percent to an all-time high of 1,673.96 at 2:26 p.m. in New York, after falling as much as 0.2 percent earlier. The Dow Jones Industrial Average added 87.37 points, or 0.6 percent, to 15,422.65. Trading in S&P 500 stocks was 3.1 percent below the 30-day average during this time of day.

“We have a long stretch now with no significant decline, and I think that's going to continue until there is some significant concern about the Fed stopping,” Jason Thomas, chief investment officer of Los Angeles-based Aspiriant, said in a phone interview. Aspiriant is an independent wealth management firm with over $7 billion in assets under management.

The Fed purchases known as quantitative easing should be maintained because financial markets indicate that they are improving financial conditions and can be adjusted based on how the economy changes, Bullard, who votes on the policy-setting Federal Open Market Committee this year, said today according to the text of remarks prepared for delivery in Frankfurt.

Fed Bank of New York President William C. Dudley said in prepared remarks for a speech today in New York that he has not decided whether the Fed's next move should be to enlarge or to shrink its bond buying program.

The central bank's chairman, Ben S. Bernanke, testifies on the outlook for the U.S. economy before the Joint Economic Committee of Congress tomorrow. The FOMC also releases the minutes of its April 30-May 1 meeting tomorrow. Policy makers said after their last meeting that they will keep buying $85 billion of bonds every month, while standing ready to raise or lower purchases as conditions evolve.

Some policy makers in recent months have signaled they favor scaling back the quantitative-easing program in the next few months. Stocks erased gains yesterday after Fed Bank of Chicago President Charles Evans said the U.S. economy has improved “quite a lot” as the central bank maintains record stimulus. The question now is “how much confidence we have that the improvements that have been made will continue and be sustained,” said Evans, who holds a vote on the FOMC this year.

'Fairly Benign'

“I view a move by the Fed toward normalizing monetary policy as ultimately a good thing,” Liz Ann Sonders, chief investment strategist at Charles Schwab Corp., said on Bloomberg Television. Her firm has $2 trillion in client assets. “It will be a taper; they're not going to grind this to a halt all of a sudden. If the reason is that economic growth has picked up with inflation expectations still fairly benign, then that's the best reason for the Fed to do it.”

The S&P 500 has surged 146 percent from its 12-year low in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases from the Fed.

Goldman Sachs Group Inc. said the U.S. stock-market rally may last at least another 2 1/2 years and send the S&P 500 up 26 percent to 2,100. David Kostin, the bank's New York-based chief U.S. equity strategist, raised forecasts for the U.S. equity benchmark, predicting it will finish 2013 at 1,750 and 2014 at 1,900 as stock valuations increase, according to a research report dated yesterday. The S&P 500 trades at 16.3 times reported operating profit, 16 percent below the average since 1998, data compiled by Bloomberg show.

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Quantitative Easing Should Continue

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