Wall Street rallied Wednesday as the Federal Reserve gave positive comment on U.S. economy.

The Fed left benchmark interest rates unchanged at 5.25 percent Wednesday afternoon as government data showed that the economy grew at a faster-than-expected 3.5 percent rate in the final quarter of last year.

However, the stronger economic conditions diminished hopes for a rate cut soon to stimulate the economy.

"Recent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market," said the Fed in a statement on Wednesday following its two-day policy-making meeting.

The Dow rose 98.38, or 0.79 percent, to 12,621.69. 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 2,463.93.

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.