NEW YORK — The Federal Reserve reassured stock-market investors Wednesday that the economy is improving and that interest rates will stay low.
Stocks recovered from an early slide to end moderately higher after the Fed issued a more upbeat assessment of the economy after a two-day meeting on interest rates. Treasury prices also reversed direction and began falling as investors withdrew money from safer holdings.
The Fed’s statement that “economic activity has continued to strengthen” since its last meeting injected some calm into a nervous market. Stocks have fallen in five of the past eight days as investors question what effect a more assertive Washington will have on Wall Street. Some investors are also concerned that stocks have risen too fast in a 10-month climb that has left the Standard & Poor’s 500 index up 62.2 percent.
The Fed left interest rates near zero, as expected. Analysts said a dissenting vote on the decision from Kansas City Federal Reserve President Thom as Hoenig was a sign that the economy is improving enough to at least discuss boosting the key lending rate.
“That means there are a couple of people who feel like that the economy is getting better at a nice rate that no longer warrants these exceptionally low rates,” said Jamie Cox of Harris Financial Group in Colonial Heights, Va.
Stocks had fallen ahead of the Fed’s announcement as the Commerce Department said sales of new homes fell 7.6 percent in December.
The Dow Jones industrial average rose 41.87, or 0.4 percent, to 10,236.16. It was down about 40 ahead of the Fed’s statement. The Standard & Poor’s 500 index rose 5.33, or 0.5 percent, to 1,097.50, while the Nasdaq composite index rose 17.68, or 0.8 percent, to 2,221.41.
Hoenig, whose district includes Colorado, said the economy has improved sufficiently to drop the pledge to keep rates near zero for an “extended period,” which has been in place for nearly a year.
The dollar rose against most other major currencies, while gold fell.
