NEW YORK (TheStreet) -- Remarks from the Federal Open Market Committee infused U.S. markets with renewed vigor over Wednesday's afternoon session. After spending much of the morning in the doldrums, the benchmark index S&P 500 booked a new record high, fueled by the Fed's assurances this recovery still has legs.
In its policy statement, the Federal Open Market Committee said economic activity will continue at a "moderate" pace and that the labor market will continue to "improve gradually."
"The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions," the Fed said.
That optimism was enough incentive for U.S. indices to book gains, though a reduced forecast for 2014 kept momentum on leash somewhat. The Fed slashed its U.S. economic growth estimates to between 2.1% and 2.3% from a previous 2.9%, as harsh weather dampened sentiment in the first quarter.
As analysts widely expected, the Fed also tapered its monthly asset purchases by $10 billion to $35 billion, an indication officials are confident the economy can withstand a reduction in stimulus programs. Quantitative easing has been tapered in $10 billion intervals for the last four meetings.
By market close, the Dow Jones Industrial Average gained 0.58% to 16,906.62 and the Nasdaq added 0.59% to 4,362.84. The S&P 500 spiked 0.77% to 1,956.98, smashing its previous record high of 1,951.27 set at the beginning of last week.
Good news from the Fed eased persistent worries over escalating conflict in Iraq. Oil prices were spiking on news Sunni militants attacked the largest oil refinery in Iraq and took control of the production units, administration building and four watch towers, or 75% of the refinery.
In Europe, markets rose for a second day as investors digested minutes released Wednesday from the June 4-5 Bank of England meeting.
To individual stocks, Amazon (AMZN - Get Report) shares surged 2.7% to $334.38 after the company's highly publicized reveal of its Fire smartphone, the online giant's latest push into the hardware space.
After the bell, Red Hat (RHT) popped 5.4% to $55.99 after beating both net income and sales estimates in its first quarter.
-- By Keris Alison Lahiff and Andrea Tse in New York