Fed decision to hold rates prompts strong late-day rally

Dow Jones Industrial Average: 9,567.34 (+118.53)

US stocks rallied yesterday, after investors took comfort from the Federal Reserve's decision to keep interest rates at historically low levels, as widely expected, lifting hopes that low rates would help spur the current economic recovery.

The Fed's policy-setting Federal Open Market Committee said it had left its benchmark federal funds rate at 1 per cent, a 1958 low hit in June after the Fed cut rates 13 times since 2001 in a bid to strengthen the economy. It also said official borrowing costs could remain low for "a considerable period".

Stocks pared some gains briefly after the Fed's mid-afternoon announcement, but a late-day buying spurt sent the major indexes sharply higher at the close.

The Dow Jones Industrial Average ended up 118.53 points, or 1.25 per cent, at 9,567.34, its biggest percentage gain in more than seven weeks.

The broader Standard & Poor's 500 Index rose 14.51 points, or 1.43 per cent, to 1,029.32. The technology-laced Nasdaq gained 41.56 points, or 2.25 per cent, to 1,887.26, its biggest percentage gain in 10 weeks. Volume was active, with about 1.37 billion shares changing hands on the New York Stock Exchange, and roughly 1.77 billion shares traded on the Nasdaq. - (Reuters)