The Dow Jones industrial average, the Standard & Poor's 500 and the Nasdaq composite index each bolted higher at precisely 2 p.m. EST as the Fed announced it will begin to taper off on its asset purchasing program, currently set at $85 billion per month.
The Fed said it will begin in January to throttle back to $75 billion in securities purchases each month.
Markets have been jittery since June, when the Fed's Chairman Ben Bernanke first broached the topic of scaling back on asset purchasing this year. Investors feared a Fed withdrawal, but they had anticipated a faster pull back than the one the Fed outlined Wednesday.
The move implied growing confidence in the economy, with the Fed saying in a statement the employment outlook has improved and the economy is growing modestly.
"It's a vote of confidence from the Fed. We've been joking for the last few years that we've been living in our parents' basement and now our parents told us it's time to get out. I think that's a good thing," BlackRock Multi-Asset Income Fund portfolio manager Michael Fredericks told the Wall Street Journal.
Wednesday's session ended with the Dow Jones industrial average up 292.71 points, or 1.84 percent, at 16,167.97.
The Standard & Poor's 500 index gained 29.65 points, 1.66 percent, to close at 1,810.65.
The Nasdaq composite index added 46.38 points, 1.15 percent, at 4,070.06.
On the New York Stock Exchange, 4.3 billion shares were traded with 2,461 stocks moving higher and 685 declining.
In Tokyo, the Nikkei 225 index gained 309.17 or 2.02 percent to 15,587.80. In London, the FTSE 100 index added 5.89 or 0.09 percent to close at 6,492.08.
The dollar traded even against the euro, holding at $1.3684, but moved lower to 104.27 against the yen.
The 10-year benchmark treasury note fell 15/32 to yield 2.896 percent.
Gold gave up $12.70 on the Comex division of the New York Mercantile Exchange, dropping 1 percent to $1,217.40 per troy ounce. Silver also lost ground, losing 10 cents to $19.74.
In late trading, crude oil added 43 cents to $97.65 per barrel.
On the Chicago Board of Trade, corn for March delivery lost 1.75 cents to $4.25 per bushel. January delivery soybeans shed 21.75 cents to $13.2475. March wheat dropped 7.25 cents to $6.125.