* FOMC minutes show Fed discussed policy exit strategy in April
* S&P 500 briefly hit session highs shortly after Fed minutes
* Tiffany shares rally after results (Updates with Fed minutes)
By Angela Moon
NEW YORK, May 21 (Reuters) - U.S. stocks rose on Wednesday, erasing the previous day's broad selloff, after minutes from the Federal Reserve's last meeting showed central bankers have discussed the eventual tightening of monetary policy but made no decisions on which tools to use.
Minutes of the session released on Wednesday said Fed staff presented several approaches to raising short-term interest rates, but said the discussion was simply "prudent planning" and not a sign rate hikes would come any time soon.
"The minutes are in line with what investors are thinking, which is that we see a rebound in growth but it is not to a point where the economy looks overly strong," said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York.
The day's gains put the S&P 500 on track for its third advance in four days. The benchmark S&P index, however, is down about 1 percent from its record intraday high on May 13.
New York Federal Reserve President William Dudley said on Tuesday inflation should "drift upwards" towards the Fed's 2 percent goal, but a swift climb in inflation was unlikely. Philadelphia Fed President Charles Plosser said the $2.5 trillion in reserves accumulated by banks could trigger more rapid inflation.
Retail stocks were once again in the spotlight. Tiffany & Co jumped 8.3 percent to $95.54 as the best performer on the S&P 500 after the jewelry retailer raised its full-year profit forecast. The S&P retail sector index was up 0.9 percent.
Nine of the 10 major S&P sectors were positive, with only utilities down slightly.
The Dow Jones industrial average rose 152.99 points or 0.93 percent, to 16,527.3, the S&P 500 gained 13.73 points or 0.73 percent, to 1,886.56 and the Nasdaq Composite added 31.39 points or 0.77 percent, to 4,128.28.
Lowe's Companies slipped 0.3 percent to $45.37. The world's second-largest home improvement chain said sales picked up in May and maintained its full-year sales growth forecast, even as it reported weaker-than-expected quarterly results.
Target Corp reported a 16 percent drop in quarterly profit but showed signs of progress in efforts to rebuild customer confidence. Shares edged down 0.5 percent to $56.88.
With earnings season nearly completed, Thomson Reuters data through Wednesday showed that of 478 companies in the S&P 500 that have reported earnings, 68.2 percent topped expectations, above the 63 percent average since 1994 and a 66 percent beat rate for the past four quarters. (Reporting by Angela Moon; Editing by Nick Zieminski)