By Madlen Read
AP Business Writer
NEW YORK - The Fed confirmed what Wall Street has already concluded: The recession is starting to ease.
Federal Reserve policymakers said at the end of a two-day meeting that while the economy is still receding, the pace of decline "appears to be somewhat slower" than the last time they met in mid-March.
That was confirmation enough for the stock market, which had started the day higher and rose further in mid-afternoon trading after the Fed's statement came out. The Dow was up about 230 points.
"It's all part of a picture of improving confidence," said Richard E. Cripps, chief market strategist for Stifel Nicolaus.
Stocks had already been sharply higher as investors responded to bright spots within a weaker-than-expected report on the nation's economic output for the first three months of the year.
Gross domestic product contracted at an annual rate of 6.1 percent, much steeper than the 5 percent fall forecast by economists polled by Thomson Reuters. But the glimmers of good news in the report drove the Standard & Poor's 500 rose to its highest trading level since late January.
Investors were encourage by a rebound in consumer spending, which accounts for more than two-thirds of U.S. economic activity, and a decline in business inventories. On President Barack Obama's 100th day in office, the GDP report at least provided signs that the nation is seeing its economic slide start to moderate.
In midafternoon trading, the Dow jumped 230.10, or 2.9 percent, to 8,247.05. The blue chips had been up about 180 ahead of the Fed's statement from its meeting.
The Standard & Poor's 500 index gained 22.55, or 3 percent, to 880.71, and the Nasdaq composite index advanced 52.03, or 3.1 percent, to 1,725.84.
Michael Sheldon, chief market strategist at Westport, Conn.-based RDM Financial, said the drop in business stockpiles "should set the stage for a pickup in production, employment and profits."
Although the Dow remains 22 percent above its early March lows, stocks have been unsteady over the past several days on fears of a potential swine flu pandemic and persistent concerns about the country's biggest banks.
Investors are nervous that some banks, notably Citigroup Inc. and Bank of America Corp., might have to get more capital from the government or other investors. Going in to today's session, the Dow had lost 59 points this week.