Wall Street higher as Fed underscores gradual tightening

By Rodrigo Campos

NEW YORK (Reuters) - U.S. stocks rose in volatile trading on Wednesday after the Federal Reserve announced it is raising its key policy rate for the first time in nearly a decade.

Markets gave the Fed's statement a dovish slant, supportive of risk assets including equities.

The Fed made clear that the 25-basis point rate hike was a tentative beginning to a "gradual" tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.

"Wrapped in dovish language, the Federal Reserve has just embarked on what will be the loosest tightening in its history," said Mohamed El-Erian, chief economic advisor at Allianz in Newport Beach, California.

"The Fed is going out of its way to assure markets that, by embarking on a 'gradual' path, this will not be your traditional interest rate cycle. Instead it will be one remembered as an unusually loose tightening."

The Dow Jones industrial average rose 77.29 points, or 0.44 percent, to 17,602.2, the S&P 500 gained 12.02 points, or 0.59 percent, to 2,055.43 and the Nasdaq Composite added 29.82 points, or 0.6 percent, to 5,025.18.

All but one of the ten major industry sectors of the S&P 500 traded higher with utilities the largest percentage gainer with a near 2-percent advance. Energy remained in negative territory as crude oil prices slid.

Indexes briefly turned lower after the decision was announced, but sharply changed direction to hit session highs within five minutes of the U.S. central bank's statement.

(Additional reporting by Jennifer Ablan; Editing by Nick Zieminski)