US stocks closed higher Wednesday, capping a rally that thrust the Dow industrials to near two-month highs, amid optimism sparked by the Federal Reserve's larger-than-expected answer to Wall Street's call for a cut in interest rates. The Fed's decision to cut 50 basis points instead of the anticipated 25 means central bankers opted "to stay in front of any credit pressures on the consumer and will now sit back and watch the impact, hoping that inflation remains low and the economy continues to grow," analysts said.

"The 'Bernanke Put' appeared to be just the right tonic for stock investors, despite rising fears of inflation risk as precious metals and commodities surge higher," said analysts at Action Economics of Fed Chairman Ben Bernanke, who oversaw the Fed first's cut in its federal funds rate in more than four years

The Dow Jones industrials rose 76.17, or 0.55%, to 13,815.56. While the Dow finished well off its highs of the session, the gains nevertheless came a day after a jump of nearly 336 points -- its biggest one-day point gain in nearly five years. Broader stock indicators also rose. The Standard & Poor's 500 index rose 9.25, or 0.61%, to 1,529.03. The Nasdaq composite index rose 14.82, or 0.56%, to 2,666.48.

The recent gains leave the Dow only 1.3% below its closing high of 14,000.41 set two months ago. The S&P, which also saw a record close on July 19, is 1.6% below that level. The Nasdaq, down about 2% from mid-July, sits well below the levels it reached amid the dot-com bubble early in the decade. Wall Street's July high came before concerns about a weakening housing market and souring home loans began to dominate Wall Street.

The Russell 2000 index of smaller companies was a big advancer again Wednesday. The index rose 10.77, or 1.34%, to 817.40. Small-cap stocks had taken a hit in Wall Street's recent retrenchment as investors often regard bigger companies as better able to weather an economic downturn because of substantial overseas operations and an ability to perhaps skate by on thinner profit margins.

Bonds ended sharply lower as investors transferred more money from fixed income investments to stocks. The yield on the benchmark 10-year Treasury note rose to 4.52% from 4.47% at Tuesday's close.

Economic data gave some investors another reason to push stocks higher. The August consumer price index and the core CPI, which excludes often volatile food and energy prices, came in as expected. The core CPI rose 0.2%. And the Commerce Department reported that construction of new homes and apartments dipped last month by 2.6% to a seasonally adjusted annual rate of 1.331 million units, the slowest pace in 12 years.

Indian ADRs end on mixed note; Patni rises more than 4%

Indian ADRs ended on a mixed note after sharp gains on Tuesday following the Fed rate cut. In the technology pack, Infosys Technologies was down 0.44% at 49.28, Patni Computers was up 4.61% at 23.81, Satyam Computers was up 3.46% at 25.71, while Wipro ended the day 0.42% lower at 14.22.

In the non-technology pack, HDFC Bank was up 2.69% at 99.09, VSNL was down 2.46% at 21, ICICI Bank was up 2.19% at 48.02, MTNL was up 2.5% at 7.80, Tata Motors was up 1.02% at 17.87, Dr Reddy's Lab was up 1.8% at 16.40 and Sterlite was up 2.66% at 16.99.