Whiplash on Wall Street After Fed Meeting; Markets End Higher

NEW YORK – U.S. stocks rose Tuesday after the Federal Reserve said it still saw moderate economic growth ahead even though credit conditions have tightened for some consumers and businesses.

The Dow Jones industrial average rose 35.52 points, or 0.26 percent, to end at 13,504.30. The Standard & Poor's 500 Index was up 9.04 points, or 0.62 percent, at 1,476.71. The Nasdaq Composite Index was up 14.27 points, or 0.56 percent, at 2,561.60.

The Fed, which also left interest rates unchanged at a policy meeting, buoyed the market by reassuring that problems in mortgage lending and corporate finance would not drag on the broader economy.

Oil prices rose in a stabilizing move after Monday's slide of 4.5 percent and lifted energy shares in Tuesday's session. Exxon Mobil Corp. (XOM) gained 2.6 percent, leading the Dow industrials higher.

Financial shares rebounded after some initial disappointment that the Fed did not signal a rate cut.

"It was more of a balanced reading. Yes, they may not cut rates soon, but the economy is in good shape, so that's good for the equity markets," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.

The relatively muted advance on the day for the Dow snapped a string of five straight sessions when the blue-chip average had net moves of at least 100 points up or down.

The S&P financial index ended up 0.9 percent after intitially falling 0.8 percent on the Fed's statement. Shares of Citigroup Inc. (CC) rose O.5 percent to close at $48.59 on the New York Stock Exchange.

A recovery in the beaten-down financial sector countered a drop in shares of big manufacturers earlier in the day.

Goldman Sachs Group (GS) denied market talk that it was liquidating its Global Alpha hedge fund and its shares rose 1.8 percent to $191.25.

Shares of American International Group (AIG), the world's largest insurer, rose 1.5 percent to $65.55 on the NYSE, a day ahead of its quarterly earnings report.

The Federal Open Market Commitee left its benchmark rate target steady at 5.25 percent.

"I don't think there is anything in the Fed announcement that was alarming. It's pretty much business as usual, stay the course," said Bill Fries, managing director of Thornburg Investment Management Co., in Santa Fe, New Mexico. "The economy is healthy, corporate earnings shouldn't suffer, housing is not so bad that it is going to derail the rest of the economy."

U.S. crude oil futures ended higher, aided by a rebound in gasoline and heating oil futures from heavy losses on Monday, and a late rise in U.S. stocks.

Shares of Exxon Mobil gained 2.6 percent to $85.70.

Before the bell, the Labor Department said second-quarter unit labor costs, a gauge of inflation and profit pressures, rose more than economists' average expectation.

In addition, the department said productivity, a measure of what a worker produces in one hour, rose less than expected in the quarter.

Trading was heavy, with about 2.25 billion shares changing hands on the New York Stock Exchange, above last year's estimated daily average of 1.84 billion. On the Nasdaq, about 2.81 billion shares were traded, above last year's daily average of 2.02 billion.

Advancers outnumbered decliners by a ratio of 19 to 14 on the NYSE and by 17 to 13 on the Nasdaq.