NEW YORK – After wading through negative territory for most of the day, stocks staged a late rally Wednesday in a sharp reversal fueled by the Federal Reserve leaving interest rates intact and some positive news about the reliability of corporate accounting.
The Dow Jones industrial average rose 144.62 points, or 1.50 percent, to 9,762.86, according to the latest data, and the Nasdaq composite added 20.43 points, or 1.1 percent, to 1,913.42. The benchmark Standard & Poor's 500 rose 12.92 points, or 1.17 percent, to 1,113.56.
The central bank drew the curtain on its aggressive monetary easing campaign amid signs of firmness in the U.S. economy. The Fed warned, however, there is still a risk of weakness in the economy, which has been mired in recession since last March.
"The decision to leave rates unchanged was expected and there is still a kind of bias toward economic weakness," said Atrizio Merciai, chief strategist of The Lombard Odier Group, which manages $60 billion in global equities and bonds in Geneva. "Still, the wording firms the view that the economy has bottomed and momentum in the economy is improving," he said.
But the central bank left the door open to further rate reductions if necessary.
"The degree of any strength in business capital and household spending, however, is still uncertain," the Fed said.
The markets also took solace in the area of troubled accounting with debt-rating agency Standard & Poor's announcing Tyco International Ltd. has satisfactorily answered S&P's accounting questions.
Tyco shares had dropped to a low unseen in more than two years amid ongoing concerns about the company's accounting, then snapped back after the S&P announcement. Tyco ended up $1.20, or 3.6 percent, at $34.86. Earlier, the stock fell to $27.48.
WorldCom Inc. , caught on Tuesday in a swirl of rumors about a debt downgrade despite a denial from ratings agency Standard & Poor's, also fell, sliding 45 cents to $9.95.
Veritas Software dropped $3.73 to $42.42 after it reported better-than-expected operating profits, but analysts said the company's raised guidance for revenues in the 2002 first quarter and full year was less aggressive than hoped.
AOL Time Warner Inc. dropped $1.95 to $24.75 after its net loss widened due to a $1.7 billion write-down of some investments, while cash earnings fell short of the rosy predictions it issued after merging, as the online business matured and advertising slumped.
Earlier, the government reported fourth-quarter U.S. gross domestic product climbed 0.2 percent -- well above expectations for a drop of 1 percent -- following a 1.3 percent drop in the third quarter.
"The numbers confirm what we've seen in economic data so far--that the economy is in recovery and that the recession probably ended sometime late last quarter," said Dan Laufenberg, chief U.S. economist for American Express Financial Advisors, which oversees $275 billion.
Advancing issues led decliners 3 to 2 on the New York Stock Exchange. Volume was heavy.
The Russell 2000 index, the barometer of smaller company stocks, rose 5.74, or 1.2 percent, to 479.72.
Overseas, markets were lower Wednesday with Japan's Nikkei stock average finishing down 1.1 percent. In Europe, France's CAC-40 finished down 1.4 percent, Britain's FT-SE 100 fell 0.9 percent, and Germany's DAX index declined 0.6 percent.
Reuters and the Associated Press contributed to this report.