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Wall Street's main indexes climbed on Thursday after the Federal Reserve announced a faster wind-down of its pandemic-era stimulus, calming nerves around surging price pressures.

The US central bank said on Wednesday it would end its bond purchases in March and signaled three quarter-percentage-point interest rate hikes by the end of 2022.

Fed Chair Jerome Powell said the US economy no longer needed increasing amounts of policy support as annual inflation has been running at more than double the central bank's target in recent months, while the economy nears full employment.

"Is the 'Santa rally' finally here? Markets certainly seem to have a spring in their step ... the prospect of three interest rate hikes in 2022 would suggest the central bank has a clear plan to not let inflation get out of control," Russ Mould, investment director at AJ Bell, wrote in a client note.

"Equally, it isn't being too aggressive to trip up the economy. This sense of balance is exactly what investors want, and an upbeat tone from the Fed certainly seems to have rubbed off on markets."

Wall Street dips ahead of Fed announcement

Recent readings on surging producer and consumer prices as well as the fast-spreading Omicron variant of the coronavirus have fueled anxiety, but with most of the biggest market-moving events for the year now over, the benchmark S&P 500 inched closer to a record high.

"I would say that a sprint to the finish likely is what this market should expect," said Art Hogan, chief market strategist at National Securities in New York.

"There's a real good chance that a lot of the things that have caused turbulence in both November and much of December are now in the rear view mirror, and markets might now be able to glide higher."

Nine of the 11 major S&P 500 sector indexes were higher, with economy-focused financials, energy and materials leading gains, while defensives consumer staples and utilities fell.

Big technology stocks were mixed, while the S&P 500 banks index added 0.8%.

At 9:48 a.m. ET, the Dow Jones Industrial Average was up 168.88 points, or 0.47%, at 36,096.31, the S&P 500 was up 12.81 points, or 0.27%, at 4,722.66 and the Nasdaq Composite was up 6.08 points, or 0.04%, at 15,571.67.

The CBOE Volatility index, often considered Wall Street's fear gauge, slipped to a three-week low.

Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, remaining at levels consistent with tightening labor market conditions.

Separately, a survey showed production at US factories increased to its highest level in nearly three years in November.

Lennar Corp fell 4.7% after the homebuilder missed analysts' estimates for quarterly profit as pandemic-led supply chain issues pushed lumber costs higher and delayed house deliveries.

Advancing issues outnumbered decliners by a 2.94-to-1 ratio on the NYSE and by a 2.19-to-1 ratio on the Nasdaq.

The S&P index recorded 41 new 52-week highs and one new low, while the Nasdaq recorded 30 new highs and 17 new lows.

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