US stocks surge

US stocks surged ahead today after the Federal Reserve said the US economy seemed likely to keep growing at its current pace, and after the central bank also softened its tone about possible rate hikes.

The Fed's statement allowed Wall Street to cast off some of the concerns that triggered last month's sharp sell-off.

Largely thanks to today's triple-digit gains, the Dow Jones industrials have surged 337 points this week, the best three-day performance for the blue chip average since November 2004.

Investors had nervously awaited the economic assessment that accompanied the Fed's decision to leave short-term interest rates unchanged at 5.25%.

They were encouraged that the Fed didn't refer to the possibility of "additional firming" of rates as it did in January, and instead said that "future policy adjustments" will depend on inflation and growth - more neutral language that the market interpreted as opening the way for a possible rate cut.

The Fed indicated that it remains vigilant about the threat of inflation, though.

The market was also relieved that the central bank left in place language in its statement that it still expects the economy will "continue to expand at a moderate pace".

While a slowdown in the economy likely would quell the threat of inflation and perhaps open the way for a rate cut it would also dent corporate profits.

"I think it did a bit to assuage the equity market's concerns that the Fed understands there is a possibility that the drag on the consumer could bring GDP down below where they expect," said Quincy Krosby, chief investment strategist at The Hartford, referring to gross domestic product - the broadest measure of the economy.

"They made it clear that they remain data-dependent. However, given the data they have today they see an economy that is still expanding, albeit more slowly."

The Dow Jones industrial average rose 159.42, or 1.30%, to 12,447.52, after having been little changed before the Fed announcement. It was the index's biggest one-day gain since July 24.

Broader stock indicators also posted strong gains. The Standard & Poor's 500 index jumped 24.10, or 1.71%, to 1,435.04, and the Nasdaq composite index advanced 47.71, or 1.98%, to 2,455.92.

Bonds rose following the Fed decision. The yield on the benchmark 10-year Treasury note fell to 4.53% from 4.55% late yesterday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude settled up 36 cents at $59.61 per barrel on the New York Mercantile Exchange. A government report showed US crude oil inventories rose again last week, but petrol stocks fell more than analysts expected.

The Fed's reflections on the economy served as a calming voice on Wall Street after growing unease about economic growth worldwide helped spark a February 27 sell-off that saw a 416-point drop in the Dow. The Dow is now 185 points, or 1.5%, lower than it was on February 26 before that plunge.

With today's decision, the Fed has left short-term interest rates, the rate banks charge each other for overnight loans, unchanged for six straight meetings after a string of 17 straight increases that began in 2004.

Though its removal of the reference to "additional firming" seemed to suggest to some investors that the central bank has softened its stance toward raising rates, analysts pointed out that the Fed still noted that "inflation risks remain".

"They have to remain data-dependent," said Sean Simko, head of fixed income management at SEI Investments, said of the Fed. "If they take their inflation bias off they risk losing their credibility."

While most of Wall Street's attention today has been squarely on the Fed, a few key earnings reports also drew interest. Morgan Stanley's fiscal first-quarter earnings and revenue blew past Wall Street's estimates and FedEx's fiscal third-quarter earnings came in stronger than expected but the shipping company warned profits in the coming fiscal year could fall below its expectations.

Morgan Stanley rose 4.66 dollars, or 6.1%, to 80.77, while FedEx fell 1.30 to 110.99.

Software companies showed gains. An acquisitive Oracle Corp. indicated its expansion plans might be reaping dividends as its fiscal third-quarter earnings and new software sales topped Wall Street's expectations. Oracle advanced 62 cents, or 3.5%, to 18.17.

Adobe Systems Inc. rose 2.56 dollars, or 6.3%, to 43.30 after the company reported its first-quarter results topped Wall Street's expectations and the company increased its profit forecast.

Advancing issues outnumbered decliners by about 5 to 1 on the New York Stock Exchange after being nearly even before the Fed's announcement. Volume came to 1.63 billion shares.

The Russell 2000 index of smaller companies rose 13.87, or 1.75%, to 807.47.