Technology stocks led a broad rally yesterday, wiping almost every remaining trace of Friday's sell-off, as the Federal Reserve confirmed expectations by not raising interest rates to protect against inflation.

The Dow Jones, which yesterday recovered 108 of the 247 points lost on Friday, rose another 114.74 points to close at 7,918.10.

Broader stock measures also posted sizable gains, led by the technology-rich Nasdaq composite index, which rose 2 per cent on the day.

Although the market's recent tumble came amid worries that inflationary pressures may be mounting again, few investors had expected the Fed to take any action to slow the economy with higher interest rates.

In another sign that the economic pace may still be moderate enough to keep inflation in check without higher Fed rates, the Commerce Department reported this morning that housing starts were unchanged in July.