NEW YORK (CNN/Money) - U.S. stock markets rallied Wednesday after the Federal Reserve boosted short-term rates an expected quarter-percentage point and implied in its statement that it is prepared to respond as needed to future fluctuations in the economy.

Wednesday also marked the last day of the month, quarter and half year. For the month and quarter, all three major indexes gained. For the half year, the Nasdaq and S&P 500 were up, while the Dow declined modestly.

On Wednesday, the Nasdaq composite (up 12.86 to 2,047.79, Charts) gained around 0.6 percent, the Dow Jones industrial average (up 22.05 to 10,435.48, Charts) gained around 0.2 percent and the Standard & Poor's 500 (up 4.64 to 1,140.84, Charts) index gained around 0.4 percent.

For the month of June, the Dow gained 2.4 percent, the Nasdaq gained just over 3 percent and the S&P 500 gained 1.8 percent.

In the second quarter, the Dow gained 0.75 percent, while the Nasdaq gained 2.7 percent and the S&P 500 gained 1.3 percent.

After six months of trading, the Dow is down around 0.2 percent. So far in 2004, the Nasdaq is up 2.2 percent and the S&P 500 is up 2.6 percent.

As had been expected, the central bank on Wednesday lifted its target for the federal funds rate for the first time in more than four years, pushing the overnight bank lending rate to 1.25 percent from 1 percent, a more than 40-year low. The central bank also boosted the discount rate.

In its much-scrutinized statement, the policy committee acknowledged the recent strength in the economy and the improvement in the labor market, while still pledging to raise rates at a "measured" pace. The committee also indicated that if inflation should go up quickly, it would be able to boost rates to counter the rise, all of which was comforting to investors.

"The fact that the Fed did act today in a very 'measured' way, as it said it would, is a comfort to the market and seems to again set up the idea of a Goldilocks environment," said Gary Wolfer, senior portfolio manager at Univest Wealth Management and Trust.

"The implication is that the economy is strengthening, but that inflation is not substantial, and the Fed will be able to handle it if it should become so," Wolfer added.

The meeting was the second of three key events for the market this week, following Monday's two day-early transfer of power in Iraq from the Coalition Provisional Authority to a temporary Iraqi government, and ahead of Friday's June unemployment report.

The June report is expected to show that employers added around 250,000 jobs to their payrolls in June, roughly in line with the 248,000 jobs added last month, according to a consensus of economists surveyed by Briefing.com. The unemployment rate is expected to hold steady at 5.6 percent.

Ahead of that on Thursday, after the start of trading, the Institute for Supply Management releases its manufacturing index for June. The index is expected to have fallen to 61.5 from 62.8 in May.

Beyond that, the market's next catalyst is likely the second-quarter earnings reports which begin next week.

"I would expect that we see an upward movement in the market over the next month," said Michelle Clayman, chief investment officer at New Amsterdam Partners.

"We've had the transition of power this week, the Fed move and statement, and the second-quarter earnings look to be strong, showing gains of 25 to 30 percent versus a year earlier," she added.

Stocks initially began the session in positive territory as investors geared up for the announcement. But the major indexes briefly slipped into the red following the release of the June reading of the Chicago Purchasing Managers Index. Chicago PMI came in at 56.4, a steep decline from the previous month's reading of 68, fueling speculation in the market that the pace of the economic recovery is beginning to slow down substantially.

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However, following the Fed announcement, the indexes gained modestly, and then got a second wind in the last hour, moving higher by the close.

Among the market movers, Research in Motion (RIMM: up $9.07 to $68.45, Research, Estimates) soared more than 15 percent in active Nasdaq trade after reporting earnings late Tuesday that rose from a year earlier and topped expectations, due to strong sales of its Blackberry wireless e-mail device. The company also said current-quarter and full-year earnings would surpass estimates.

Lexar Media (LEXR: down $1.33 to $6.68, Research, Estimates), which makes flash memory cards for digital cameras, fell close to 17 percent in active Nasdaq trade after the company warned that second-quarter results would miss expectations due to cost reductions and higher component purchasing costs. Rival SanDisk (SNDK: down $0.72 to $21.69, Research, Estimates) lost more than 3 percent in sympathy.

Medical device maker Thoratec Labs (THOR: down $3.68 to $10.74, Research, Estimates) tumbled 25.5 percent after the company warned that second-quarter and full-year earnings will miss expectations due to weak sales of heart pumps, its key product.

Commerce Bancorp (CBH: down $6.14 to $55.01, Research, Estimates) tumbled 10 percent on the New York Stock Exchange as investors shed shares following the indictment of two of the regional bank's executives in a corruption probe.

Dow gainers included aerospace components Boeing (BA: up $0.58 to $51.09, Research, Estimates) and United Technologies (UTX: up $0.95 to $91.48, Research, Estimates), as well as retailer Wal-Mart Stores (WMT: up $0.78 to $52.76, Research, Estimates).

Market breadth was positive and volume was improved from recent weeks. More than 1.45 billion shares changed hands on the New York Stock Exchange, where winners beat losers by close to three to one. On the Nasdaq, around 1.72 billion shares traded, with gainers beating losers by more than three to two.

Following the Fed announcement, Treasury prices sustained and built upon their morning gains, first sparked by the Chicago PMI report. The 10-year note climbed three-quarters of a point in price for a yield of 4.59 percent, down from 4.68 percent late Tuesday. Bond prices and yields move in opposite directions. The dollar gained versus the yen and fell versus the euro.

NYMEX light sweet crude oil prices rose $1.39 to $37.05 a barrel, reacting to Saudi Arabian predictions of no new production increases. Among other commodities, COMEX gold added 20 cents to settle at $393 an ounce.