The Dow Jones Industrial Average rose 303.70 points, or 1.00 percent, to 30,668.53. The S&P 500 added 54.51 points, or 1.46 percent, to 3,789.99. The Nasdaq Composite Index increased 270.80 points, or 2.50 percent, to 11,099.15.
Ten of the 11 primary S&P 500 sectors ended in green, with consumer discretionary and communication services up 3.02 percent and 2.36 percent, respectively, outpacing the rest. Energy slipped 2.13 percent, the lone declining group.
The Fed on Wednesday raised its benchmark interest rate by 75 basis points, the sharpest rate hike since 1994, as it races to damp inflation that is running at a four-decade high.
The Federal Open Market Committee (FOMC), the Fed's policy-making body, decided to raise the target range for the federal funds rate to 1.5 to 1.75 percent and "anticipates that ongoing increases in the target range will be appropriate."
Fed Chair Jerome Powell said Wednesday that he expects a 50 or 75 basis point rate hike will be "most likely" at the next central bank policy meeting in July, adding that the committee will make decision based on incoming economic data.
The Fed's newly released quarterly economic projections showed the median FOMC projection for year-end federal funds rate has jumped to 3.4 percent, much higher than the 1.9 percent projected in March.
"The Fed underscored the seriousness of its mission with its first 75 bp rate hike since 1994," as it is "trying to reverse inflation already well above target," Chris Low, chief economist at FHN Financial, said in a note on Wednesday.
U.S. equities have been under tremendous pressure recently, which saw the S&P 500 end in bear market territory on Monday, as last week's data showing an unexpected reacceleration in U.S. inflation raised concerns about the Fed's ability to cool prices without sparking a recession.
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