Stocks responded positively Wednesday to a Federal Reserve decision to keep rates steady, with the central bank saying the U.S. economy may be “leveling out.” 

The gains erased the near 100-drop in the Dow that occurred on Tuesday ahead of the decision.

Today’s Markets

On Wednesday at the New York Stock Exchange, the Dow Jones Industrial Average jumped 120.16 points, or 1.3%, to 9361.61, the Standard & Poor's 500 rose 11.46 points, or 1.15%, to 1005.81 and the Nasdaq Composite rose 28.99 points, or 1.47%, to 1998.72. The consumer-friendly FOX 50 rose 7.99 points, or 1.1%, to 732.74.

While the Federal Reserve’s Federal Open Market Committee’s decision to keep interest rates steady at a range of 0% to 0.25% was widely expected, the Fed did say for the first time since this recession began 20 months ago that the economy was no longer slowing, but “leveling out.”

It shows that the nation's top economic observers believe the U.S. economy, while still weak, is at least finding some sort of a bottom and may be stabilizing. In recent weeks, Wall Street has seen stocks rise on the backs of consecutive economic reports that came in better than expected, including last week’s closely-watched jobs report

"The Fed acknowledged the reality of improving economic conditions while simultaneously remaining concerned about the fragility of such improvement," said Dan Greenhaus with the brokerage house Miller Tabak, in an e-mail.

Outside of the Fed’s decision, Wall Street had very little company or earnings data to work through for Wednesday’s session.

Insurers and the homebuilders led gain on Wall Street. Shares of Toll Brothers surged more than 14% as the company reported its first net increase in sales for the first time in four years. The results helped boost shares of industry competitors Pulte Homes (PTM), Centex (CTX) among others.

Meanwhile, taxpayer-owned insurance company AIG (AIG) said it had sold a consumer lending business in China. Shares of Dow component Travelers (TVR), auto insurance company Allstate (ALL) along with nearly all of the major insurance names were higher on the news. Allstate also benefited from an upgrade from "neutral" to "buy" from analysts at Bank of America-Merrill Lynch.

Stocks also responded positively to a Treasury auction of $23 billion in 10-year notes, which saw moderately strong oversubscription.

In the commodity markets, oil gained 72 cents to $70.17 a barrel while gold futures fell 90 cents to $947.50 a troy ounce. 

Company News

Ford Motor Co. (F) said it will boost production of its Ford Focus vehicle, including working factories overtime and Saturday shifts, Dow Jones reported.

The U.S. Department of Justice and Swiss bank UBS (UBS) said they have reached an agreement in principle regarding the release of 52,000 accounts tied to wealthy American banking clients. The accounts are part of an IRS tax probe into offshore assets that allegedly American clients hid to avoid paying taxes. The details of the agreement were not released and the settlement is pending court approval.

Shares of Macy's (M) gained more than 6% after the department store chain reported that earnings fell to 20 cents from 29 cents a year ago, but solidly beating the 15-cent profit expected by analysts, according to Thomson Reuters.

Bakery and food company Sara Lee (SLE) reported a quarterly loss on Wednesday, as the company wrote down some of its assets during the quarter. Excluding one-time items, Sara Lee reported flat earnings of 29 cents a share, 5 cents better than what analysts had expected.

The newly-hired CEO of AIG (AIG) Robert Benmosche is reportedly spending his first weeks as head of the embattled insurer on vacation, according to a report by Bloomberg News. A spokesman with AIG, which has received billions in direct taxpayer help the company avoid systemic collapse, said the company does not comment on executives' schedules. 

Microsoft (MSFT) and Nokia (NOK) announced a partnership to bring Microsoft Office software onto Nokia mobile devices. 

Clothing retailer Liz Claiborne (LIZ) reported a loss of 48 cents, compared with an 11-cent profit a year ago as revenue plunged by nearly a third $683.8 million. Analysts polled by Thomson Reuters expected a loss of 40 cents and revenue of $691 million.

Global Markets

In London, the FTSE 100 gained 0.97% to 4716.76 while Paris' CAC 40 rose 1.48% to 3507.24 and Germany's DAX gained 1.22% to 5350.09. 

In Asia, Japan's Nikkei 225 dropped 1.42% to 10435.00 while Hong Kong's Hang Seng fell 3.03% to 20435.24. China's Shanghai Composite plunged 4.66% to 3112.72.