The S&P 500 Index closed higher today, adding 5.33 points or 0.49 percent. It recovered to 1,097.50 from a downward spike minutes after the FOMC statement that took the index to a low of 1,083.11.

Financials gained the most as the Dow Jones U.S. Financials Index was up 2.13 percent, compared to a 0.41 percent gain for Dow Jones Industrial Average.

Bank of America (NYSE:BAC) is up 2.88 percent, Wells Fargo (NYSE:WFC) is up 3.96 percent, Morgan Stanley (NYSE:MS) 2.35 percent, and JPMorgan (NYSE:JPM) up 2.21 percent. Bank of America and JPMorgan were the biggest gainers of the Dow behind Boeing (NYSE:BA).

Most bank stocks made up the bulk of the rally after the Federal Open Market Committee said it expected to keep interest rates low for an extended period of time. JPMorgan was essentially flat at 2:15 pm but gained over 2 percent afterwards.

Goldman Sachs (NYSE:GS) lagged behind with a gain of only 0.43 percent. The stock may be weighed down by the possibly that it will have to shed its trading operations as a result of the proposed ‘Volcker Rule.’ Trading and principal investments accounted for $34 billion of its $45 billion net revenues for 2009.

Regional banks also soared, with PNC (NYSE:PNC) gaining 3.23 percent, U.S. Bancorp (NYSE:USB) 3.33 percent, and Fifth Third (NASDAQ:FITB) up 4.01 percent.

Today was a busy day for Washington. Treasury Secretary Tim Geithner was first grilled this morning in front of the House Committee on Oversight and Government Reform about his involvement with the AIG bailout. Geithner maintains that the bailout was necessary to stabilize the economy while lawmakers accused him of helping out Wall Street at the expense of Main Street.

A worse than expected new home sales report briefly weighed on the market in morning trading, before investors focused their attention on the Federal Open Market Committee statement at 2:15 pm.

As widely expected, the FOMC left interest rates unchanged. It did slowly withdraw liquidity. It is letting various lending initiatives expire and closing various credit facilities. It announced that it will purchase more mortgage-backed securities, but at a slower place.

The Fed also foresees “exceptionally low levels of the federal funds rate for an extended period” on subdued inflation pressures, low resource utilization rate, and household spending that is still constrained by a weak labor market.

Bernanke, whose term expires at the end of January, will have his Senate confirmation vote tomorrow. According to the latest tally by the Wall Street Journal, 52 senators will vote for Bernanke, 19 against, and the rest undecided. A second term for Bernanke is favorable for investors, as news of Senate opposition sent stocks tumbling last week.

Obama will begin his State of the Union address tonight at 9:00 pm Eastern Time. The President has the challenge of fighting unemployment while facing a swelling budget deficit. Bank reforms and healthcare will also be key issues.