Bond prices also rose as the Fed said inflation would likely remain in check. While the Fed's decision was not a surprise, it does give investors certainty that the low interest rate environment will likely last for at least several more months.
KEEPING SCORE: The Dow Jones industrial average was up 133 points, or 0.8 percent, to 16,872 as of 3 p.m. Eastern. The Standard & Poor's 500 index rose 17 points, or 0.9 percent, to 2,013 and the Nasdaq composite added 57 points, or 1.2 percent, to 4,946. Bond prices rose, sending yields lower. The yield on the 10-year Treasury note fell to 2.21 percent from 2.30 percent late Wednesday.
FED STANDS PAT: Fed policymakers, wrapping up a two-day meeting, voted to keep U.S. interest rates at record lows. The Fed said that while the U.S. job market is solid, there are reasons to be concerned about global economic growth.
"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term," the Fed said in its statement.
Interest rates have been near zero since 2008 in response to the financial crisis and Great Recession. The last time the central bank actually raised rates was 2006.
The low rates have kept borrowing costs inexpensive in an effort to stimulate borrowing and lending. They have also encouraged investors to put money into the stock market by making the returns on bonds and other interest-bearing investments less appealing.
ANALYST'S TAKE: "The market got what it wanted," said Alan Rechtschaffen, a portfolio manager at UBS. "The market had a 'rate rant' last month and that scared the Fed."
NOW WHAT? Since the Fed kept interest rates near zero, the chances of them raising interest rates this year have dropped. There are only two more meetings this year for Federal Reserve policymakers, in October and December.
CURRENCIES: The dollar fell against other currencies after the Fed said it would keep interest rates low for the time being. An interest rate increase would have sent the dollar higher. The euro rose 1 percent to $1.14 and the dollar fell 0.3 percent to $120.21 Japanese yen.
PAY-PER-VIEW: Cablevision, a New York-area cable TV provider, jumped $4.22, or 15 percent, to $32.75 after agreeing to be bought by the European cable company Altice. The merger would create the fourth-largest cable company in the U.S.
DIAL TONE: Verizon slumped 95 cent, or 2 percent, to $45.26 after the communications company said its earnings may be flat this upcoming year.
ENERGY: U.S. benchmark crude edged down 25 cents to close at $46.90 a barrel on the New York Mercantile Exchange. Brent crude, a benchmark for international oils, fell 67 cents to $49.08 a barrel in London. Oil prices had surged the day before.
METALS: The price of gold fell $2 to settle at $1,117 an ounce, silver rose 10 cents to $14.98 an ounce and copper was unchanged at $2.45 a pound.