NEW YORK (CNNMoney.com) -- Blue chips scored their biggest gains in three years Thursday, with the Dow industrials soaring 217 points as investors bet the end of Fed rate hikes may be approaching.

The rally came after the Federal Reserve raised a key overnight bank lending rate a quarter-percentage point to 5.25 percent, as expected - the 17th straight increase since the central bank began raising rates in June 2004.

In its closely watched statement, the Fed left the door open for future increases, but some investors saw signs in the language indicating that the central bank may pause after its latest move. (Read the statement.)

The Dow (up 217.24 to 11,190.80, Charts), the world's most widely watched stock market gauge, jumped 2 percent.

It was the biggest point gain for the Dow since March 2003, according to Jeff Hirsch of the Stock Trader's Almanac, and the biggest one-day percentage gain since April 2005.

The broader Standard & Poor's 500 index (up 26.87 to 1,272.87, Charts) jumped 2.2 percent and the tech-heavy Nasdaq composite (up 62.54 to 2,174.38, Charts) climbed nearly 3 percent.

It was the best percentage gain for the Nasdaq in over two years, and the biggest point gain in over three, Hirsch said. The S&P posted its best gains by both measures in over three years.

Investors cheered signs that the Fed may be getting closer to winding down.

"A sigh of relief is the best way to describe it," said Michael Carty, principal at New Millennium Advisors. "Over the last month or so, these markets have been going to extremes because there was a lot of uncertainty out there. Investors don't like that kind of instability."

Stocks have struggled in recent weeks as concerns over inflation, interest rates and the economy pounded markets worldwide, with the major gauges in the U.S. slipping into the loss column for the year earlier this month before rebounding.

With Thursday's gains, the Dow has climbed 4.1 percent so far this year and the S&P is up 1.8 percent, but the Nasdaq is still down 1.7 percent for the year.

As of 5:30 p.m. ET, Nasdaq and S&P futures pointed to a modestly lower open for stocks Friday.

Among stocks in the Dow, all 30 were higher.

McDonald's (up $1.59 to $33.56, Charts) was the top gainer after Merrill Lynch upgraded the burger chain to "buy" from "neutral," sending the stock up 5 percent.

Financial services companies also rallied, with shares of J.P. Morgan (up $1.41 to $42.68, Charts), Citigroup (up $1.01 to $48.86, Charts) and American Express (up $1.71 to $53.89, Charts) all higher.

Dow component Walt Disney (up $0.50 to $29.88, Charts) named ex-Procter & Gamble CEO and Disney director John Pepper as non-executive chairman, succeeding former Sen. George Mitchell. Shares rose nearly 2 percent.

But after the closing bell, Dow component Microsoft (up $0.31 to $23.47, Charts) said it laid off 5 percent, or 214, of its U.S. sales staff, after earlier announcing it will delay to its release of the Office 2007 business productivity software. Shares edged lower on Inet.

Apple (up $2.95 to $58.97, Charts) said it's investigating stock option grants, including one to CEO Steve Jobs that was cancelled, sending shares down nearly 3 percent in after-hours trading.

Palm (down $0.01 to $18.66, Charts) posted higher quarterly profit on strong sales of its Treo phones, but issued revenue and earnings forecasts below estimates and its shares fell over 8 percent after hours.

Meanwhile, Research In Motion (up $0.26 to $65.99, Charts) posted lower first-quarter earnings but bettered its growth estimates for the BlackBerry, sending shares up 5 percent on Inet.

Duke Energy (up $1.31 to $29.69, Charts) soared 4.6 percent during the regular trading session after Lehman Brothers raised its rating on the power company to "overweight" from "equal weight," citing the company's decision to spin off its natural gas businesses.

Shares of Tenet Healthcare (down $0.13 to $7.10, Charts) fell 2 percent after it reached a $900 million deal with the government to settle allegations it bilked Medicare. A big early rally in the stock faded.

Market breadth was positive. On the New York Stock Exchange, advancers topped decliners by a margin of five to one on volume of 1.9 billion shares. On the Nasdaq, winners beat losers by a margin of four to one as 2.2 billion shares changed hands.

Earlier in the session, new claims for jobless aid rose by a slightly larger-than-expected 4,000 last week, the Labor Department said, but applications remained at levels suggesting a healthy job market.

And economic growth leapt ahead at an upwardly revised 5.6 percent annual rate in the first quarter, helped by lower imports and strong corporate profits, the Commerce Department said.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 5.20 percent from 5.24 percent late Wednesday.

The dollar turned lower against the euro and the yen.

In commodities markets, oil prices jumped $1.33 to $73.52 a barrel on the New York Mercantile Exchange.

COMEX gold climbed $7.90 to $589.30 an ounce.

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Related: Fed hikes rates again

Plus: Read the Fed statement