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NEW YORK: US stocks rallied on Wednesday, buoyed by comments from the Federal Reserve that recession-mired economy is stabilising as it announced a scale-back in its massive pump priming effort.
The Dow Jones Industrial Average gained 120.16 points (1.30 percent) to finish at 9,361.61, snapping a two-day losing streak.
The tech-heavy Nasdaq composite climbed 28.99 points (1.47 percent) to 1,998.72 and the broad-market Standard & Poor's 500 index advanced 11.46 points (1.15 percent) to 1,005.81.
The major indices posted sharp gains in morning trade and held onto them after the Federal Reserve announcement.
Investors had been on tenterhooks waiting for the Fed's decision on interest rates and the accompanying statement for clues on the direction of the world's largest economy as it struggles with a punishing 20-month-old recession.
Concluding a two-day monetary policy meeting, the Federal Open Market Committee (FOMC) said that "economic activity is levelling out" and maintained its near-zero interest rate policy.
The FOMC announced it would be scaling back purchases of Treasury bonds as it extended the 300-billion-dollar programme by one month, to October.
Marc Pado at Cantor Fitzgerald said the market was reassured that the Fed did not step away from its highly stimulative policy.
"They are not at the point of considering exiting the stimulus programmes, they are not going to raise rates," he said.
"The fear was, if they even talk about the exit strategy, people will start (thinking about) increasing rates, and we are not ready for that yet."
The market also welcomed US trade deficit figures which signalled a pick-up in global demand. The Commerce Department reported the trade gap rose slightly in June but less than expected, while exports and imports increased.
Technology shares got a lift from better than expected quarterly earnings from Applied Materials, up 3.33 percent at 13.66 dollars.
Microsoft rose 1.73 percent to 23.53 dollars after announcing a deal with Nokia to make Microsoft Office software available on smartphones made by the Finnish company.
In the retail sector, Macy's soared 6.01 percent to 16.40 dollars on market-topping earnings. Wal-Mart gained 1.51 percent to 50.51 dollars.
Among other stocks in focus, JPMorgan Chase climbed 2.35 percent to 42.21 dollars. The Wall Street Journal reported the firm wants to sell 23 office properties for more than one billion dollars.
Bank of New York Mellon rose 2.32 percent to 28.71 dollars after buying an investment subsidiary of Britain's Lloyds Banking Group, Insight Investment, for 386 million dollars.
Government-rescued insurer AIG gained 1.65 percent to 25.33 dollars. It has completed the sale of its energy and infrastructure assets for 1.9 billion dollars.
Soft drinks and snacks maker Pepsico fizzled 0.40 percent to 56.68 dollars after buying Amacoco, the leading Brazilian maker of coconut juice beverages.
Bonds slumped. The yield on the 10-year US Treasury bond climbed to 3.701 percent from 3.693 percent on Tuesday and that on the 30-year bond rose to 4.523 percent from 4.453 percent. Bond yields and prices move in opposite directions. - AFP/de
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