The news added to gains from upbeat quarterly reports from Microsoft Corp and Alphabet Inc that lifted sentiment about the earnings season.

Powell said in a news conference following the Fed announcement that he did not believe the U.S. economy is currently in a recession but that it is softening.

He also said the lack of clear visibility into the future of the economy means the U.S. central bank can provide reliable guidance about where its policy is headed only on a "meeting-by-meeting" basis.

"The willingness of Powell to let data guide them going forward was something that pleased the market. He didn't automatically say we needed another rate hike," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

"It was a calming statement coming on the heels of a day where you saw some earnings and revenues that were better than expectations, albeit expectations that were very tempered."

The Fed action comes on top of a 75 basis points hike last month and smaller moves in May and March, in an effort by the Fed to cool inflation.

According to preliminary data, the S&P 500 gained 102.27 points, or 2.58%, to end at 4,023.32 points, while the Nasdaq Composite gained 465.28 points, or 4.02%, to 12,027.86. The Dow Jones Industrial Average rose 432.05 points, or 1.37%, to 32,196.00.

Wednesday's hike was widely anticipated by investors.

"This was widely expected and encouraging that it was a unanimous decision," said Jack Ablin, chief investment officer and founding partner at Cresset Capital. "It was well telegraphed and properly balanced against expectations."

Microsoft forecast double-digit growth in revenue this fiscal year on demand for cloud computing services. Alphabet reported better-than-expected sales of Google search ads, easing worries about a slowing ad market.