The Fed now expects a burst of growth fueled by tax cuts and ultra-low unemployment of below 4 percent in 2018 and 2019, though little movement on inflation.

A final bill could be unveiled by Friday, with decisive votes expected next week in both chambers.

Congressional Republicans reached a deal on final tax legislation on Wednesday that would slash the corporate tax rate to 21 percent.

"Talks on tax reforms and the Fed announcement brings confidence in the fact that the economy is still moving in a positive and sustained fashion," said Paul Springmeyer, investment managing director at U.S. Bank Private Wealth Management.

Shares of big banks recovered from an initial decline after the Federal Reserve raised rates by 25 basis points but kept its outlook for 2018 and 2019 unchanged.

Goldman Sachs, JPMorgan and Bank of America rose by between 0.76 percent and 1.51 percent, pushing up the S&P financial index 0.38 percent.

"You've seen some M&A activity hit the screens that is driving some interest as well - that's a three-legged soul that's moving the market."

Walt Disney Co struck a deal to buy film, television and international businesses from Rupert Murdoch's Twenty-First Century Fox for $52.4 billion in stock. Disney's shares inched up 0.12 percent in volatile trading and Fox shares rose 3 percent. Growth outlook in the world's largest economy was bolstered by a more-than-expected increase in U.S. retail sales in November.

The number of Americans filing for unemployment benefits fell to near a 44-1/2-year low last week.

At 10:50 a.m. ET (1550 GMT), the Dow Jones Industrial Average rose 0.16 percent to 24,623.74 - on track to post six days of gains in a row.

The S&P 500 was up 4.16 points, or 0.16 percent, at 2,667.01 and the Nasdaq Composite was up 21.18 points, or 0.31 percent, at 6,896.98.

Amazon rose 1 percent and Alphabet 1.6 percent, contributing the most to gains on the S&P 500 and the Nasdaq.

Telecom service providers Verizon, AT&T and CenturyLink were down between 0.6 percent to 1.4 percent and weighed on the S&P telecom index.

Advancing issues outnumbered decliners on the NYSE by 1,438 to 1,317. On the Nasdaq, 1,561 issues rose and 1,159 fell.

(Reporting by Rama Venkat Raman and Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)