New York  - US stocks rallied on Wednesday after two straight days of losses, buoyed by the Federal Reserve's more upbeat assessment of the state of the country's economy.

The US central bank said economic activity was "leveling out" and kept its benchmark interest rates at a record low range of 0-0.25 per cent.

The Fed said it would keep its federal funds rate level "for an extended period" and said it would begin winding down its purchases of Treasury securities.

A Wall Street Journal survey earlier in the day found that 27 out of 47 economists believed the country's 20-month recession has ended.

The blue-chip Dow Jones Industrial Average climbed 120.16 points, or 1.3 per cent, to close at 9,361.61. The broader Standard and Poor's 500 jumped 11.46 points, or 1.15 per cent, to 1,005.81. The technology-heavy Nasdaq Composite Index rose 28.99 points, or 1.47 per cent, to 1,998.72.

The rally came after major stock indices posted some of their worst losses in a month on Tuesday, led by a dip in financial firms.

On currency markets, the dollar dropped against the euro, closing at 70.48 euro cents from 70.66 euro cents on Tuesday. The dollar inched higher against the Japanese currency to 96 yen from 95.95 yen.  (dpa)