WASHINGTON — The Federal Reserve delivered a vote of confidence in the economy yesterday, saying it would slow the pace of an emergency rescue program and indicating the recession appears to be ending.

The central bank also held interest rates steady at record lows, with a closely watched bank lending rate near zero, and again pledged to keep them there for "an extended period" to nurture an anticipated recovery.

Fed Chairman Ben Bernanke and his colleagues said the economy appeared to be "leveling out" — a considerable upgrade from their last meeting in June, when the Fed observed only that the economy's contraction was slowing.

"We're no longer at DEFCON 1," said Richard Yamarone, economist at Argus Research, referring to the defense term used to indicate being under siege.

"The Fed is pulling in some of its life preservers now that the economy is no longer sinking."

The more optimistic tone lifted Wall Street. The Dow Jones industrials gained about 120 points, or 1.3 percent, to close above 9,360.

The Fed said it would gradually slow the pace of its program to buy $300 billion worth of Treasury securities and shut it down at the end of October, a month later than previously scheduled.