ECONOMY IS BETTER

U.S. Stocks Rise After Fed Says Economic Risks Have Diminished

By Michael Patterson

June 25 (Bloomberg) -- U.S. stocks extended gains, sending the Standard & Poor's 500 Index to its biggest rally in almost two weeks, after the Federal Reserve said risks to economic growth have diminished.

JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. led financial shares to their biggest jump in two months after the Fed left its benchmark lending rate unchanged at 2 percent. Jabil Circuit Inc., the maker of mobile phones for Nokia Oyj, rallied the most in six years after forecasting earnings that topped analysts' estimates.

The Standard & Poor's 500 Index added 13.84 points, or 1.1 percent, to 1,328.13 at 2:29 p.m. in New York. The Dow Jones Industrial Average rose 68.15, or 0.6 percent, to 11,875.58. The Nasdaq Composite Index climbed 40.99, or 1.7 percent, to 2,409.27. Three stocks gained for each that fell on the New York Stock Exchange.

``I like the comment of diminished economic risk, because what it tells the markets is that they feel increasing confidence that the economy is bottoming,'' James Paulsen, chief investment strategist of Wells Capital Management, which oversees about $222 billion, said in an interview on Bloomberg Television. ``That's a good thing and that might be one of the things that the stock market is responding to.''

The S&P 500 has dropped 4 percent since policy makers said April 30 that higher energy and commodity prices boosted inflation expectations. It fell to the lowest since March 19 yesterday after consumer confidence weakened and United Parcel Service Inc. said rising fuel costs will reduce profit.