The U.S. central bank pointed to solid U.S. economic growth and a strengthening labor market while downplaying the impact of recent hurricanes, a sign it is on track to lift borrowing costs again in December.
The Fed has raised rates twice this year and currently forecasts one more hike by the end of 2017 as part of a tightening cycle that began in late 2015.
On top of confirming the market's expectation that it would not hike rates at this meeting, the Fed also "made some fairly favorable comments about the economy," said Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates Inc in Toledo, Ohio. "That gave a little boost of confidence to investors."
The Dow Jones Industrial Average <.DJI> rose 57.77 points, or 0.25 percent, to 23,435.01, the S&P 500 <.SPX> gained 4.1 points, or 0.16 percent, to 2,579.36 and the Nasdaq Composite <.IXIC> dropped 11.14 points, or 0.17 percent, to 6,716.53.
Energy <.SPNY> was the best-performing S&P 500 sector, rising 1.1 percent while utilities <.SPLRCU> lagged the most.
Tech <.SPLRCT>, which has led the market's rise this year, closed up 0.1 percent for its fifth straight session of gains.
After the market closed, Facebook (>> Facebook) shares were down 1.7 percent in volatile trading after the social media company's quarterly report.
Investors had all but ruled out a move at the U.S. central bank's policy meeting this week with attention focused on who will be in charge of monetary policy at the end of Fed Chair Janet Yellen's first term in February 2018.
President Donald Trump is set to announce his nomination on Thursday. Fed Governor Jerome Powell, who has supported Yellen's gradual approach to raising rates, is viewed as relatively stock-market friendly and the likely choice.
After the closing bell, a Wall Street Journal report, citing a person familiar with the matter, said the White House has notified Powell that it will nominate him as the next Fed chair on Thursday. S&P 500 e-mini futures <EScv1> were down 0.1 percent after trading resumed.
"This was what was expected. So I think the market was pretty much pricing that in," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
Developments at the Fed come as corporate earnings, which have supported the stock market's run to record highs, are coming in generally above expectations for the third quarter.
With about two-thirds having reported, S&P 500 companies are on track to have earnings growth of 7 percent for the third quarter, up from 5.9 percent growth expected at the start of October, according to Thomson Reuters I/B/E/S.
Estee Lauder (>> Estee Lauder Companies Inc) shares rose 9.2 percent after the cosmetics maker forecast holiday-quarter sales ahead of market expectations. U.S. Steel (>> United States Steel Corporation) shares rose 7.8 percent after the company's quarterly report.
In economic data, a measure of U.S. factory activity retreated from a 13-1/2-year high in October as some of the boost from hurricane-related supply disruptions faded, but continued to point to strengthening manufacturing conditions. Other data showed a surge in private sector hiring in October.
Advancing issues outnumbered declining ones on the NYSE by a 1.09-to-1 ratio; on Nasdaq, a 1.69-to-1 ratio favored decliners.
About 6.9 billion shares changed hands in U.S. exchanges, above the nearly 6.2 billion daily average over the last 20 sessions.
(Additional reporting by Caroline Valetkevitch and Chuck Mikolajczak in New York, Lindsay Dunsmuir and Howard Schneider in Washington, Sruthi Shankar in Bengaluru; Editing by Nick Zieminski and Cynthia Osterman)
By Lewis Krauskopf