Federal Reserve policymakers decided to leave interest rates unchanged after a two-day meeting, but they also said they would consider raising rates at the last meeting of 2015 if the economy keeps improving.
The Dow Jones industrial average had been up 130 points just before the Fed released its policy statement at 2 p.m. Eastern time, then briefly retreated into the red after the statement came out. By late afternoon the Dow more than recovered, closing up 198.09 points, or 1.1 percent, at 17,779.52. The Standard & Poor’s 500 index gained 24.46 points, or 1.2 percent, to 2,090.35. The Nasdaq composite picked up 65.55 points, or 1.3 percent, to 5,095.69.
The Fed cut its benchmark interest rate to almost zero in late 2008 to stimulate the economy during the Great Recession. Although Fed Chair Janet Yellen has said she wants to start raising rates this year, the Fed struck a cautious tone in its September meeting following some rough patches in the U.S. economy and warning signs from overseas.
Investors concluded that the Fed would probably leave rates alone until next year, but the latest release shows that an increase on Dec. 16 is very possible. In its latest statement, the Fed eliminated language expressing concern about the global economy.
The prospect of higher interest rates set off a rally in banks, which stand to make more money on lending. Bank stocks in the S&P 500 jumped 2.4 percent, twice as much as the broader index.
The dollar rose against the yen and the euro. If the Fed does begin to raise rates in December, it would come as central banks in Europe and Japan continue to pursue stimulus programs. The euro fell sharply against the dollar, to $1.0925 from $1.1040 late Tuesday. The dollar rose to 121.03 yen from 120.33 yen.
In bond trading, the yield on the 10-year Treasury note rose to 2.09 percent from 2.04 percent the day earlier. Yields on Treasury notes affect rates on mortgages and many other kinds of loans.
Oil prices soared after Pemex, the national oil company of Mexico, said it received permission to swap crude oil with the U.S. That could represent a step toward ending the U.S. ban on exporting crude.
U.S. crude climbed $2.74 to $45.94 a barrel in New York. Brent crude, which is used to price international oils, rose $2.24, or 4.8 percent, to $49.05 a barrel in London.
In other energy trading, wholesale gasoline rose 6.3 cents to close at $1.350 a gallon in New York, heating oil rose 6 cents to $1.484 a gallon and natural gas fell 5.9 3 cents to $2.033 per 1,000 cubic feet.
While the Fed news weighed heavily on the broader market, earnings reports continued to drive many individual stocks. Apple gained $4.72, or 4.1 percent, to $119.27 after the tech giant reported another quarter of record earnings late Tuesday, boosted by surging sales in China.
Metals prices increased. Gold rose $10.30, or 0.9 percent, to $1,176.10 an ounce and silver added 43 cents, or 2.7 percent, to $16.29 an ounce. Copper prices stayed steady at $2.36 a pound.