The Fed, which left interest rates unchanged and at a 45-year low, reassured the market with a statement that its credit policy was supporting the economic rebound. It also reassured investors worried that deflation might threaten the nation’s growth.

"They said that risk is on the downside for deflation and they expect rates to stay low for a while. That is the message for the market," said John P. Waterman, chief investment officer at Rittenhouse Asset Management.

Analysts said the market was also encouraged by a report showing a rise in consumer prices, because that increase points to an improving economy.

"The fact is that the economy is tending to show a pattern of improvement, rather than deterioration," said Kevin Caron, market strategist, Ryan, Beck & Co.

The Dow closed up 118.53, or 1.3 percent, at 9,567.34. The gain more than compensated for yesterday’s loss of 22.74 and last week’s loss of 31.79.

The broader market was also higher. The Nasdaq composite index rose 41.55, or 2.3 percent, to 1,887.25. The Standard & Poor’s 500 index advanced 14.51, or 1.4 percent, to 1,029.32.

The pace of buying accelerated in late afternoon trading, following the Fed’s announcement on rates and its assessment of the economy. Just before the Fed’s news, the Dow was up about 48 and the Nasdaq was up about 21.

The Fed said it will hold interest rates steady, a position some economists expect it to maintain at its next meeting Oct. 28 and for the remainder of the year.

Investors were more concerned about the Fed’s take on the economic recovery rather than its action on interest rates because the central bank was widely expected to leave rates untouched. They were hoping the Fed would say that deflation, a dangerous slide in prices, doesn’t pose a threat to the economic revival.

And, indeed, the Fed said low rates are "providing important ongoing support to economic activity."

Today’s other economic news — the Labor Department’s Consumer Price Index — also matched economist’s expectations and supported the notion that deflation is not a danger. Consumer prices rose by 0.3 percent in August, the biggest increase in five months, due in part to a spike in gasoline costs, the department said.

The rise in consumer prices has a positive spin to it in that it backs up other data signaling that an economic recovery is under way.

"It helps build a case for an expanding economy," Caron said.

Brokerage house upgrades also contributed to today’s advance.

Dow Jones & Co. Inc. rose $2.12 to $47.63 after Deutsche Securities upgraded the media company and publisher of The Wall Street Journal to "hold" from "sell."

United Parcel Service Inc. advanced $1.35 to $63.96 after Merrill Lynch & Co. Inc. upgraded it to "buy" from "neutral."

Micron Technology Inc. rose 40 cents to $13.62 after First Albany Corp. upgraded the chipmaker to "strong buy" from "buy."

Meanwhile, The Kroger Co. fell 85 cents to $17.80 after missing second-quarter earnings expectations by 7 cents a share and cutting its full-year outlook.