While the possibility of higher and more aggressive interest rate hikes remains a concern, investors were relieved to see that the Fed's Open Market Committee was willing to keep interest rate hikes minimal even as signs of inflation in the economy increased.

The Fed raised the nation's benchmark rate by a quarter percentage point at that meeting to 2.75 percent, the seventh such increase since last summer. In keeping to their consistent pattern, policy makers noted that the nation's productivity remained strong and would help keep inflation in check — something many investors had been hoping to hear.

"What the Fed's saying here is basically that the economy is doing all right and that we've got our eye on the ball," said Bryan Piskorowski, market analyst at Wachovia Securities. "The market was going into this expecting the worst, and now that we see a little less hawkish demeanor with this announcement, the market's got some wiggle room."

The Dow Jones industrial average rose 59.41, or 0.57 percent, to 10,507.97. The Dow had fallen more than 87 points earlier in the session, nearing its intraday lows for the year before the Fed minutes were released.

Broader stock indicators also reversed their earlier losses and gained ground. The Standard & Poor's 500 index was up 6.55, or 0.55 percent, at 1,187.76, while the Nasdaq composite index gained 13.28, or 0.67 percent, to 2,005.40.

Oil prices dropped for the sixth time in the past seven sessions after the International Energy Agency forecast slower growth in demand. A barrel of light crude settled at $51.86, down $1.85, on the New York Mercantile Exchange.

Bonds rose sharply after the Fed minutes were released, with the yield on the 10-year Treasury note falling to 4.36 percent, down from 4.44 percent late today. The dollar made gains against other major currencies, while gold prices fell.

Stocks fell early in the session after the Commerce Department said the nation's trade deficit hit an all-time high of $61 billion in February, a 4.3 percent increase over January that was far more than economists had expected. While U.S. exports rose by just $50 million, imports soared by $2.58 billion.

The trade deficit news initially heightened fears that the Federal Reserve would have to raise interest rates aggressively to shore up the dollar. But the Fed minutes assuaged those fears, at least for the short term.

"Even without the Fed minutes, you still have oil and you still have interest rate fears and inflation," said Jack Ablin, chief investment officer at Harris Private Bank. "We have earnings reports, and that may help some, but the big fears are still there."

In company news, American International Group Inc. climbed $1.10 to $53.20 after analysts at Merrill Lynch reiterated a "buy" rating on the Dow component's stock. The move came as former Chairman Maurice "Hank" Greenberg met with regulators' to answer questions about the company's business practices. A source who spoke on condition of anonymity said Greenberg invoked his Fifth Amendment rights and refused to answer.

Verizon Communications Inc. plans the sale of 132 million additional common shares to raise nearly $8.2 billion, which would more than cover the costs of acquiring MCI Inc. Verizon added 29 cents to $35.19, while MCI was up 8 cents at $26.09.

Abbott Laboratories Inc. said profits rose 1.8 percent from a year ago, and the drug maker's earnings were in line with Wall Street's forecasts. The company also reiterated its profit estimates for the rest of the year. Abbott edged 15 cents higher to $47.90.

Genentech Inc. rose $1.12 to $57.72 as the company reported a 61 percent hike in profits on the strength of its cancer drug sales. The biotechnology company beat Wall Street estimates by 4 cents per share, helped in part by sales of Avastin, a colon cancer treatment that has shown promise in battling other types of cancer.

Online broker Ameritrade Holding Corp. said its quarterly profits fell 12 percent as the number of customer transactions fell sharply. While Ameritrade still surpassed Wall Street profit forecasts by a penny per share, the company also saw a very high customer attrition rate. Ameritrade climbed 45 cents to $11.15.

The Russell 2000 index of smaller companies was up 5.86, or 0.97 percent, at 613.03.

Advancing issues outnumbered decliners by about 8 to 5 on the New York Stock Exchange, where volume came to 1.58 billion shares, compared with 1.22 billion shares traded today.