The Dow Jones Industrials leaped 518.76 points, or 1.6%, to conclude the session Wednesday at 34,063.10.
The S&P 500 index continued its upward trajectory, hiking 95.41 points, or 2.2%, to 4,357.86.
The NASDAQ Composite spiked 487.93 points, or 3.8%, to 13,436.55.
The Fed announced at the conclusion of its two-day meeting Wednesday that it will increase short-term interest rates by a quarter of a percentage point, a well-telegraphed move by the central bank as it seeks to control surging inflation.
But it was the central bank’s outlook that surprised traders somewhat and knocked the market down initially.
The Fed forecast a consensus funds rate of 1.9% by year’s end, which would mean a hike at each of the remaining central bank meetings this year.
Bank shares gained on optimism their bottom lines would get a boost from higher rates. JPMorgan shares added 4.4%, while Bank of America added 3.1%.
Micron Technology was among the best-performing S&P 500 stocks, gaining more than 8.9%. Starbucks shares climbed 5.1% after an upgrade from JPMorgan, while Dow member Boeing advanced 5%.
Stocks started the day in the green following a Financial Times report that Ukraine and Russia have made “significant progress” on a peace plan and Russian withdrawal.
Before the FT report, stocks were gaining on hopes that some sort of ceasefire was close. Ukrainian President Volodymyr Zelenskyy said a peace agreement was beginning to “sound more realistic” in an address to the nation Tuesday.
Russian Foreign Minister Sergey Lavrov told the BBC there was “some hope of reaching a compromise.” Russian State media quoting the Kremlin echoed similar sentiments overnight.
In economic data, consumers continued to spend in February through at a slower pace than expected, according to a Commerce Department report Wednesday. Advance retail sales grew 0.3% for the month, slightly below the 0.4% Dow Jones estimate.
Treasury prices dipped slightly, raising yields to 2.18% from Tuesday’s 2.16%. Treasury prices and yields move in opposite directions.
Oil prices moved lower $1.43 to $95.01 U.S. a barrel.
Gold prices lost $1.60 to $1,928.10 U.S. an ounce.