By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

NEW YORK (MarketWatch) -- The U.S. stock market moved higher on Wednesday, building on the biggest one-day gain in four weeks during the previous session and sending the Dow Jones Industrial Average to intraday record high.

Investors welcomed an unexpected drop in consumer price index--a key inflation measure. The thinking is that falling inflation may embolden Federal Reserve doves to keep interest rates low for longer.

Worries about the Federal Open Market Committee meeting conclusions have colored much of the market action in the past few days. However, earlier sentiment on Wednesday was lifted by People's Bank of China's most recent steps to inject billions into its banking system in order to boost flagging growth.

The S&P 500 (SPX) rose 3 points, or 0.2 to 2.002.34. The Dow Jones Industrial Average (DJI) added 27 points, or 0.2% to 17,158.37. The Nasdaq Composite (RIXF) gained 7 points, or 0.1%, to 4,560.03.

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Dan Veru, chief investment officer at Palisade Capital Management, is surprised that the stock market is not even higher.

"If you are bearish, it means you expect a big policy change from the Fed. The conditions are just not right for that to happen. Data have been inconclusive and certainly do not indicate that the economy is growing faster. We expect the Fed to stay in position in terms of interest rates," Veru said.

In economic news, U.S. consumer prices fell in August for the first time in 16 months, largely because of a decline in the cost of filling up at the gas station. Separately, the U.S. current account deficit fell to $98.5 billion in the second quarter from a revised $102.2 billion in the first quarter, the Commerce Department said Wednesday.

A gauge of confidence among home builders rose in September to the highest level since November 2005, according to National Association of Home Builders/Wells Fargo data released Wednesday.

But the main attraction on Wednesday is the FOMC statement, due at 2 p.m. Eastern Time. which will be followed by a news conference with Federal Reserve Chairwoman Janet Yellen. Also read: Eight keys to Fed's September meeting and Fed's exit plan may be a bumpy ride for investors

If the "considerable time" phrase sticks, the market will be left as complacent on interest rates as it was two weeks ago, said Chris Beauchamp, market analyst at IG, in a note. However, that also could mean that equity markets get a boost after fretting in recent sessions about the Fed plans, he added. Need to Know: Two aging techs may be getting whipped back into 1990s shape

In Asia, Hong Kong stocks broke a five-session losing streak after a senior Chinese banking executive said the People's Bank of China is injecting 500 billion yuan ($81 billion) into the country's five big state-owned banks to help counter an economic slowdown. A string of recent weak data has heightened worries among investors.

Stocks to watch: Auxilium Pharmaceuticals Inc. (AUXL) soared 42%, after news late Tuesday that Endo International PLC (ENDP) will buy it for $28.10 per share in a cash-and-stock deal. Endo was up 5%.

Lennar Corp.(LEN) rose 4.8% after posting a 47% rise in third-quarter profit on Wednesday as higher prices and deliveries drove up revenue.

General Mills Inc. (GIS) fell 2% after posting a disappointing quarterly profit.

DuPont (DD) shares rose 3.8% after an investor urged a breakup of the company.

FedEx Corp. (FDX) rose 3.7% after posting better-than-expected profit and sales.

U.S. Steel Corp. (X) was up 10% after the company said it was making major strategic changes late Tuesday.

Adobe Systems Inc. (ADBE) fell 3%. The software maker posted quarterly results on Tuesday.

Rackspace Hosting Inc. (RAX) tumbled 15% after the cloud-computing company said it won't be selling itself. (Read more about the day's notable movers here http://www.marketwatch.com/story/adobe-rackspace-fedex-expected-to-be-in-spotlight-2014-09-17.).

Other markets: The Stoxx Europe 600 index took inspiration from Wall Street and China stimulus, while the FTSE 100 managed small gains ahead of Thursday's vote on Scottish independence. Gold(GCZ4) was unable to hang onto positive territory. Barclays cut its forecast for the metal, citing risks skewed to the downside. Oil prices (CLZ4) were largely unchanged.

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