The Fed, which issued a statement at the end of a two-day policy meeting midday Wednesday, had previously said it would hold rates low through mid-2013.
Following the Fed's announcement, the Dow Jones industrial average (INDU) gained 83 points, or 0.7%, after shedding as much as 95 points earlier in the day. The S&P 500 (SPX) added 11 points, or 0.9%, after losing 7 points earlier.
"Investors are definitely encouraged by the Fed's promise to remain accommodative for the next few years, but they're also wondering why the Fed is being so cautious since we've seen pretty good economic data recently," said Mark Lamkin, CEO of Lamkin Wealth Management.
In addition to keeping low rates, Fed chief Ben Bernanke also left the door wide open to additional stimulative policies, including a third round of bond purchases, a policy known as quantitative easing, or QE3.
"The Fed is in a wait-and-see mode," noted Lamkin. "They saying they're encouraged by the signs, but not so encouraged that they're ready to take the economy and markets off the juice."
Meanwhile, investors are also watching Greece's ongoing negotiations with representatives of private-sector creditors to reduce its debt burden. Officials are set to resume informal talks Thursday in Athens.
Greece is in desperate need of an agreement to receive additional bailout funds from the European Union and International Monetary Fund. Without these funds, the country may not be able to make a €14 billion debt payment that's due March 20.
Oil for March delivery rose 45 cents to settle at $99.40 a barrel.
Gold futures for February delivery gained $35.60 , or 2.1%, to settle at $1,700.10 an ounce.
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