NEW YORK - Stocks shot higher yesterday after the Federal Reserve answered two of Wall Street's major concerns, indicating that the economy remained healthy and that inflation pressures were easing. The Dow Jones industrials climbed nearly 100 points to set another trading high, while the Russell 2000 index had its first close above 800.

The Fed, which issued its economic assessment as it decided to leave short-term interest rates unchanged at 5.25 percent, said recent indicators "suggested somewhat firmer economic growth" and tentative signs of stabilization in the housing market. Investors also appeared pleased by the central bank's comments that readings on core inflation had "improved modestly" in recent months.

Wall Street had expected the Fed's Open Market Committee to leave short-term interest rates unchanged for the fifth straight meeting after a string of 17 straight increases that began in 2004. But investors had been uneasy about the central bank's economic-assessment statement and whether it would indicate that policymakers were considering raising interest rates in the near future because the economy, or inflation, or both have been growing too fast.

"They coupled a firmer economic-growth scenario with the expectation of moderate growth, and they expect the inflation outlook to be improving," John Miller, head of fund management at Nuveen Investments Inc., said of the Fed. "I don't think it makes it any more likely that they would feel compelled to raise rates."

The Dow rose 98.38, or 0.79 percent, to 12,621.69. The Dow came within a few decimal points of a week-old closing high and set a new trading high of 12,657.02. The previous trading high, set Jan. 24, was 12,623.45; the Dow's record close remains 12,621.77.

Broader stock indicators also spurted higher. The Standard & Poor's 500 index rose 9.42, or 0.66 percent, to 1,438.24, and the Nasdaq composite index gained 15.29, or 0.62 percent, to finish at 2,463.93.

The Fed's comments pushed the Russell 2000 index of smaller companies above the 800 mark to a record close; it finished up 2.37, or 0.30 percent, at 800.34. Its previous high was Tuesday.

For the first month of the year, the Dow rose 1.27 percent, while the S&P gained 1.41 percent, and the tech-dominated Nasdaq added 2.01 percent. Some on Wall Street are fond of noting that as the S&P 500 goes in January, so goes the year. The so-called January barometer has had only five major errors since 1950, for an accuracy rate of 91.1 percent, according to the Stock Trader's Almanac.

Bond prices rose sharply after the Fed's statement, with the yield on the benchmark 10-year Treasury note falling to 4.82 percent from 4.88 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

"We knew the economy was producing better numbers over the past couple of months, but they also acknowledged the improved outlook on inflation," Miller said. "I think the description does characterize a soft-landing scenario, which appears to be unfolding."

Stocks, which had been mixed on lighter-than-normal trading ahead of the rate decision, had found some support earlier yesterday as the economy gave off fresh signs that it could sidestep a sharp slowdown. The Commerce Department found that the economy, as measured by gross domestic product, grew at a 3.5 percent annual rate in the fourth quarter as consumers increased spending despite a pullback in the housing market. Wall Street expected an increase of 3 percent.