US STOCKS-Wall St holds gains after Fed minutes

* Homebuilder shares rise

* December private payrolls higher than expected

* Indexes up: Dow 1.2 pct, S&P 1.2 pct, Nasdaq 1.1 pct (Updates to after release of Fed minutes)

By Caroline Valetkevitch

NEW YORK, Jan 7 (Reuters) - U.S. stocks were up more than 1 percent in afternoon trading on Wednesday after briefly paring gains following the release of the minutes from the most recent Federal Reserve meeting.

The central bank pressed ahead with plans to begin raising interest rates later this year despite an apparently vigorous debate over how to communicate its intentions, according to minutes of the Fed's December meeting.

"It looks to me like the Fed is erring on the side of, 'Don't get too worried about rate hikes too soon,' said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston. "A lot of people are saying it will happen towards the end of the year, at best, because of the oil-induced global weakness."

Stocks had been sharply higher before the minutes, rebounding from five straight sessions of losses following strong U.S. private sector jobs data and as deflation concerns in the euro zone were seen pushing the bloc's central bank into action.

At 2:07 p.m., the Dow Jones industrial average rose 201.36 points, or 1.16 percent, to 17,573, the S&P 500 gained 23.05 points, or 1.15 percent, to 2,025.66 and the Nasdaq Composite added 52.09 points, or 1.13 percent, to 4,644.83.

The day's gains follow the S&P 500's longest losing streak in 13 months.

Homebuilders were among the day's biggest gainers, with an index of housing shares up 2.5 percent, after a Bloomberg report that U.S. President Barack Obama was set to announce a reduction of Federal Housing Administration mortgage insurance premiums. (Additional reporting by Ryan Vlastelica; Editing by Nick Zieminski)