US stocks boosted by Nasdaq

Wall Street rallied today as investors scared off by the Federal Reserve’s assessment of the economy in the previous session regained their confidence and bid stocks higher.

The Nasdaq composite index reached a five-year high as investors focused on technology and smaller company stocks.

The advance reflects US investors’ overall optimism about the economy and corporate earnings, although many remain concerned that rising borrowing and energy costs could weigh on both, analysts said.

“I think after yesterday’s sell-off, when we turned off the lights and came back in the morning, we got a chance to say, ‘You know what? We’ve overdone it here’,” said Arthur Hogan, chief market analyst at Jefferies & Co.

Stocks sold off sharply on Tuesday, pulling the Dow Jones industrials down 95 points, after the Fed suggested more interest rate hikes would be needed to head off inflationary pressures.

The Fed’s comments accompanied its decision to raise its benchmark rate a quarter percentage point to 4.75%.

The Dow today rose 61.16, or 0.55%, to 11,215.70. The Dow was held back somewhat by General Motors’s stock, which fell after it announced earnings restatements in its mortgage arm.

Broader stock indicators also were higher. The Nasdaq gained 33.32, or 1.45%, to close at 2,337.78, its best close since February 16, 2001, when it closed at 2,425.38.

The Standard & Poor’s 500 index added 9.66, or 0.75%, to 1,302.89.