NEW YORK (CNNfn) - U.S. stocks rose for the second straight session Wednesday, but ended off earlier highs after the Federal Reserve left interest rates and its inflationary bias unchanged, prompting investors, hoping for a softer tone, to take some cash off the table.
The underlying uncertainty about the outcome of the presidential election and the vote in Florida, which has rattled investors since Nov. 7, is still weighing on market sentiment.
"Market participants had hoped, possibly unjustifiably, that the [Fed's] bias would change to neutral," said John Davidson, chief investment officer with Orbitex Group. "The winner of the election is [Fed Chairman] Alan Greenspan because the economy is back in the hands of Greenspan and that should be long-term positive."
 The Nasdaq composite index gained 27.22 points to 3,165.49. The Dow Jones industrial average rose 26.54 points to 10,707.60, while the S&P 500 advanced 6.86 to 1,389.91.
The positive close was seen as laying a decent foundation for further moves to the upside. "We're not giving back what we gained yesterday but I don't think we're going straight up from here," said Davidson. "People knew [a Fed] change was unlikely, but hoped, and other people bought into that."
 Stocks moved sharply higher ahead of the Fed announcement in anticipation that the Fed's statement would render a softer tone, with the Nasdaq gaining nearly 70 points and the Dow surging more than 110 points before the selling set in.
"Contrary to logic, people were hoping the Fed would change their bias to a neutral stance," said Bill Meehan, chief market analyst at Cantor Fitzgerald. "Part of the exuberance earlier was an increased appreciation of the likelihood that we would have a president-elect before the market opens on Monday."
But Tom Gallagher, head of U.S. equities at CIBC World Markets, told CNNfn's market coverage that -- despite two days of solid gains -- he's not ready to proclaim to the recent market slump. (446K WAV) (446K AIFF).
Market breadth was mixed. Advancers beat decliners on the New York Stock Exchange 1,659 to 1,186 as more than 1 billion shares changed hands. On the Nasdaq, losers outpaced winners 2,067 to 1,832 as more than 1.6 million shares were traded.
In other markets, Treasury securities edged higher. The dollar weakened versus the euro but gained against the yen.
No rate change from Fed
The Federal Open Market Committee, the Fed's monetary policy-making body, left rates unchanged amid continuing signs of a slowing economy. One of those signs came Tuesday, when the government reported only a slight gain in retail sales for October.
Investors and analysts tuned into what the Fed's accompanying statement revealed, which did not veer from its previous inflationary bias. Most analysts had expected the meeting to come and go with no surprises.
"Nobody expected a rate cut, but a few kinder, gentler words would have been nice," said John Forelli, senior vice president and portfolio manager at Independence Investment Associates. "Such language might have buoyed the markets because clearly we are entering rough waters."
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The most active stock that dragged the Nasdaq lower in early trading was Network Appliance (NTAP: Research, Estimates), which plunged $20.13 to $76.13. The computer-network storage provider reported triple-digit earnings and sales growth late Tuesday, beating expectations, but a forecast of slower sales growth ahead clouded the company's outlook.
"With the economy slowing, I expect a pronounced deceleration in earnings over the next couple of quarters," said Independence Investments Forelli.
Other tech issues gained.
Sycamore Networks (SCMR: Research, Estimates) added $4 to $68.44. The optical networking firm posted slightly better-than-expected results for its fiscal first quarter late Tuesday, crediting its gains to strong revenue growth.
 Micron Technology (MU: Research, Estimates) advanced $1.63 to $35 despite Lehman Brothers' lowered 2001 earnings estimate for the semiconductor maker to $2.50 a share from $3.50, based on weaker-than-expected dynamic random access memory, or DRAM, demand. It kept its "buy" rating on Micron Technology shares, however.
Wal-Mart (WMT: Research, Estimates) rose $2.13 to $49 and Philip-Morris (MO: Research, Estimates) gained $1.13 to $35.75
 Financial issues led the Dow lower. J.P. Morgan (JPM: Research, Estimates) fell $5.06 to $150.50 and Citigroup (C: Research, Estimates) lost 56 cents to $50.19.
Concern about White House outcome wanes
Investors will continue to watch events in Florida, the state that will determine whether Texas Gov. George W. Bush or Vice President Al Gore occupies the White House for the next four years.
"It looks like there might be some resolution out of Florida by the end of the weekend and that has lifted some of the uncertainty from investors' minds," Tom Giles, senior equity strategist with Dean Investment Associates, told CNNfn's Talking Stocks. "Because we're going to have a resolution the markets have started to dissipate that."
Click here for CNN.com's election coverage
Bush holds a 300-vote lead, according to an official state canvas. Both sides are engaged in legal wrangling concerning a possible manual recount in some Florida counties. 
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