New York, Feb 24 (IANS): US stocks traded higher as investors digested the central bank's newly-released monetary policy report.

The Dow Jones Industrial Average on Friday gained 347.51 points, or 1.39 per cent, to 25,309.99. The S&P 500 increased 43.34 points, or 1.60 per cent, to 2,747.30, Xinhua news agency reported.

The Nasdaq Composite Index was up 127.31 points, or 1.77 per cent, to 7,337.39.

The Fed is expected to continue gradual interest rate hikes this year on the expectation of stronger economic outlook.

"The (Federal Open Market) Committee expects that the ongoing strength in the economy will warrant further gradual increases in the federal funds rate," said the semi-annual Monetary Policy Report to the Congress.

The report was released before new Fed Chair Jerome Powell's first Congress testimony which was scheduled on February 27.

Despite the recent market turbulence, the Fed still held that overall vulnerabilities in the US financial system remain moderate on balance.

However, it warned that valuation pressures continue to be elevated across a range of assets, including equities and real estate.

In their public remarks, Fed officials have downplayed the impact of recent market volatility, saying they would stick to their forecast of stronger growth outlook and gradual rate hike pace.

The market has been closely following any updates from the Fed.

On Wednesday, the US central bank released minutes from its January meeting. According to the minutes, the Fed officials see increased economic growth and an uptick in inflation as justification to continue to raise interest rates gradually.

After the news came out, the US 10-year Treasury yield spiked to as high as 2.956 per cent. Major stock indices rose sharply with the Dow jumping more than 300 points before paring gains completely.