U.S. stocks rose on Wednesday as the Federal Reserve said the pace of economic deterioration appeared to be slowing, lifting the S&P 500 to levels last seen in January.

Earlier government data had showed that gross domestic product dropped at a 6.1 percent annual rate in the first quarter, more than expected. But consumer spending rose and a decline in inventories was deemed good news by strategists as it suggested manufacturers and retailers will have to stock up in merchandise.

The thinking is that no matter what the Fed came out with, the markets would take it as a positive, and the markets are holding right now, said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.

We were expecting to hear that the economy is bottoming.

The Dow Jones industrial average <.DJI> shot up 169.25 points, or 2.11 percent, to 8,186.20. The Standard & Poor's 500 Index <.SPX> gained 19.28 points, or 2.25 percent, to 874.44. The Nasdaq Composite Index <.IXIC> jumped 42.57 points, or 2.54 percent, to 1,716.38.

After the Fed's statement, indexes had risen by as much as 3 percent, with the S&P 500 hitting its highest intraday level since January.

Ending a two-day policy meeting, the central bank said the pace of deterioration in the U.S. economy appeared to be slowing, but it would continue to keep interest rates exceptionally low for an extended period.

The Fed held benchmark overnight interest rates in the zero to 0.25 percent range they reached in December.

(Reporting by Ellis Mnyandu; Editing by Jan Paschal)