U.S. stock rallied on after the Federal Reserve said it saw signs of a more stable economy.
The Fed said in the latest statement, which followed its decision to leave interest rates unchanged at record low levels, that economic activity is "leveling out."
The Fed also said it would gradually slow the pace of its program to buy Treasury securities.
Although consumer spending has stabilized, job losses, sluggish income growth, hits to wealth from tanking home values and still hard to get credit could make Americans cautious in the months ahead, the Fed said.
Before the Fed announcement, stocks were rallying as investors seized on a buying opportunity, picking up bargain stocks after a big pullback Tuesday.
The Commerce Department said on Wednesday that the U.S. trade deficit rose 4 percent to 27 billion U.S. dollars in June as imports rose for the first time in 11 months and exports rose for the second straight month, confirming that the global recession is easing its grip.
In corporate news, Macy's Inc. reported a better-than-expected second-quarter profit. The retailer is also increasing its outlook amid benefits from reducing costs.
The Dow Jones industrial average was up 119.78 points, or 1.30percent, at 9,361.23. The Standard & Poor's 500 index rose 11.45 points, or 1.15 percent, at 1,005.80. The Nasdaq composite index was up 28.99 points, or 1.47 percent, at 1,998.72.
