NEW YORK --- A more upbeat Federal Reserve is reassuring investors that they've been making the right bets.
Stocks bounded higher Wednesday after the central bank ended a two-day meeting by saying the economy appears to be "leveling out" rather than shrinking at a slower rate.
Wednesday's advance energized the market's summer rally after it stalled Monday and Tuesday. Major market indexes jumped more than 1 percent, including the Dow Jones industrial average, which rose 120 points. Long-term Treasurys fell after the Fed said it would slow its purchases of government debt.
Financial and technology shares posted some of the strongest gains after a ratings upgrade and profit reports provided evidence of a rebound. The stock market's advance was itself adding to bank and insurance stock gains -- its climb means their investment portfolios are surging in value.
Investors who sent stocks soaring the past four weeks on expectations for a recovery went into Wednesday hoping for a change in the Fed's language. Many investors were anticipating that the central bank's assessment might be moving closer to their own after the Labor Department said Friday that the nation's unemployment rate fell in July for the first time in 15 months.
The Fed's statement was particularly gratifying after traders suffered an attack of nerves Tuesday that slashed 1 percent from the major indexes. Concerns about the health of banks fed that drop, but the Fed's statement soothed those fears. The central bank also left interest rates unchanged, as expected.
CONFIDENCE GROWS
WASHINGTON --- The Federal Reserve delivered a vote of confidence in the economy Wednesday, saying it would slow the pace of an emergency rescue program and indicating the recession appears to be ending.
The central bank also held interest rates steady at record lows, with a closely watched bank lending rate near zero, and again pledged to keep them there for "an extended period" to nurture an anticipated recovery.
Fed Chairman Ben Bernanke and his colleagues said the economy appeared to be "leveling out" -- a considerable upgrade from their last meeting in June, when the Fed observed only that the economy's contraction was slowing.
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