Fed Doves Rally Bulls

"The Fed is not eliminating their tightening bias, but they are softening it up a bit," says Harris. "It's the way you react to broader uncertainty. You want more flexibility."

Today's statement suggests a Fed that is "trying to figure out if there will be a second dip down in the housing market," Harris says. "It is difficult to assess ... the scale and economic impact of the subprime sector's problems."

The financial sector rallied sharply on the FOMC statement and on the heels of a strong Morgan Stanley(MS Quote) earnings report. Morgan Stanley rose 7%. Goldman Sachs(GS Quote) and Citigroup(C Quote) both gained about 3%.

In addition to financials, major averages were led by strength in technology stocks following better-than-expected earnings late Tuesday from Oracle (ORCL Quote) and Adobe Systems (ADBE Quote).

Fed Doubles Down

Despite Wednesday's market fireworks, many economic data points have been somewhat weaker since the last FOMC meeting on Jan. 31. Income and labor market measures remain firm, but that strength is not feeding into solid retail sales, and regional manufacturing reports have been dim. On inflation, unit labor costs are at a six-year high, and producer prices jumped sharply, adding pricing pressure into the pipeline for consumer goods.