A surge in tech titans including Apple, Amazon, Nvidia and Facebook parent Meta pushed the S&P 500 to its first new all-time high since early 2022 thanks to bets on lower borrowing costs this year.
The rally was helped by a closely watched survey from the University of Michigan showing a surge in consumer confidence and optimism about falling inflation.
However, analysts warned that traders may have run a little ahead of themselves at the end of last year as they forecast the Fed will cut rates up to six times before December, with the first coming in March.
A string of data in recent weeks has shown inflation remains sticky and well above the bank's two percent target, while the jobs market continues to show resilience despite borrowing costs sitting at two-decade highs.
Minutes from the Fed's most recent meeting also showed decision-makers were happy to keep monetary policy tight until they are confident prices are under control.
On Friday, San Francisco Fed boss Mary Daly said it was likely too early to think of moving just yet.
"While I think it's appropriate for us to look forward and ask when would policy adjustments be necessary so we don't put a stranglehold on the economy, it's really premature to think that that's around the corner," she told Fox Business on Friday.
"Do I get consistent evidence that inflation is coming down, or do I get any early signs with the labour market starting to falter?
"Neither one of those right now is pushing me to think that an adjustment is necessary."
Atlanta Fed chief Raphael Bostic said that while he was open to changing his mind, he did not expect a tweak until the third quarter, while his Chicago counterpart Austan Goolsbee added that decision-making was "fundamentally about the data".
The chances of a reduction before the end of the first quarter fell last week to less than 50 percent, having been above 80 percent the week before, Bloomberg News reported.
The advance in New York was picked up by most Asian markets, with Tokyo extending its blockbuster start to the year thanks to a weaker yen and rising Japanese inflation.
Sydney, Singapore, Taipei, Manila and Wellington also rose.
However, Shanghai and Hong Kong continued their painful start to the year caused by ongoing weakness in China's economy and a lack of measures from authorities aimed at kickstarting growth.
Oil prices retreated again as Middle East tensions were overshadowed by worries over the global outlook and after the International Energy Agency warned demand growth would halve in 2024.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: UP 1.2 percent at 36,375.56 (break)
Hong Kong - Hang Seng Index: DOWN 1.0percent at 15,152.67
Shanghai - Composite: DOWN 0.5 percent at 2,818.94
Dollar/yen: DOWN at 147.87 yen from 148.10 yen on Friday
Euro/dollar: UP at $1.0905 from $1.0898
Pound/dollar: UP at $1.2713 from $1.2703
Euro/pound: UP at 85.78 pence from 85.76 pence
West Texas Intermediate: DOWN 0.5 percent at $72.92 per barrel
Brent North Sea Crude: DOWN 0.5 percent at $78.15 per barrel
New York - Dow: UP 1.1 percent at 37,863.80 points (close)
London - FTSE 100: UP less than 0.1 percent at 7,461.93 (close)
dan/dva
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