New York  - US stocks posted strong gains on Wednesday as most companies that reported profits for the first quarter beat estimates on the day, drowning out reports of a sharp contraction in the US economy over the first three months.

Time Warner Inc, Goodyear Tire & Rubber Co, DreamWorks Animation SKG Inc and Hess Corp all beat analysts' expectations, offering some hope that the worst may be over and driving all major US stock indices up by more than 2 per cent.

The Commerce Department said US gross domestic product fell 6.1 per cent in the first three months of the year, worse than expected and capping the worst two-quarter performance of the US economy in five decades.

But the Federal Reserve said the economy was beginning to stabilize in the last few weeks and decided to keep its benchmark interest rate unchanged at a record low of
0-0.25 per cent.

The blue-chip Dow Jones Industrial Average added 168.78 points, or 2.11 per cent, to 8,185.73. The broader Standard & Poor's 500 Index jumped 18.48 points, or 2.16 per cent, to 873.64. The technology- heavy Nasdaq Composite Index was up 38.13 points, or 2.28 per cent, to 1,711.94.

The US currency dropped against the euro to 75.33 euro cents from 76.11 euro cents on Tuesday. But the dollar gained against the Japanese currency to 97.71 yen from
96.41 yen. (dpa)