At the FOMC news conference, Fed Chairman Jerome Powell acknowledged that the tighter financial conditions were partly due to the increase in U.S. Treasury yields, but he did not rule out another rate hike if needed.

In a newsletter, OANDA market analyst Edward Moya wrote, "Fed's probably done after back-to-back holds kept rates at a 22-year high." "The Fed did not rule out a rate increase in the coming months, but swap contracts showed traders weren't convinced."

According to the CME FedWatch Tool, market players now anticipate a 74% chance that the Fed will maintain current rates in January, up from a 59% chance, and that the Fed may begin reducing rates around mid-2024.

With the tech-heavy Nasdaq 100 up 1.5% and the S&P 500 index up 1.1%, stocks ended the day substantially higher. The yield on the 10-year U.S. Treasury fell to 4.73% from almost 5% earlier this week as investors priced in the reduced likelihood of additional hikes.