Wall Street held on to a big advance Tuesday after the Federal Reserve left interest rates unchanged and assuaged some of the market's fears...

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NEW YORK — Wall Street held on to a big advance Tuesday after the Federal Reserve left interest rates unchanged and assuaged some of the market’s fears about the economy. The Dow Jones industrial average was up more than 250 points.

The market had already shot higher before the Fed meeting in response to a report that services sector activity fell less than expected last month and another drop in oil prices.

In a statement accompanying its widely expected rate decision, the Fed reported that “economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports.” That assessment was welcome news to a market that has feared the economy was falling into recession because of weak consumer spending.

The Fed did have some darker news, stating that “inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities.” But it also said it expected inflation to moderate later in the year.

Earlier, the Institute for Supply Management, the trade group of corporate purchasing executives, said its services sector index rose to 49.5 from 48.2 in June. Analysts surveyed by Thomson Financial/IFR predicted it would rise to 49.0.

Any reading below 50 signals contraction. The report is based on a survey of the institute’s members and covers such indicators as new orders, employment, inventories, prices and exports and imports.

The notion that the sector might be in better shape than many investors feared gave Wall Street reason for optimism.

Oil prices slid further Tuesday, dropping to as low as $118 a barrel on widening expectations that the slumping U.S. economy will keep eroding consumer demand for gasoline and other petroleum products. Crude’s retreat has eased some of Wall Street’s concerns about the impact of higher prices on consumer spending, which accounts for more than two-thirds of the economy.

The Dow Jones industrial average was up 259.56, or 2.30 percent, at 11,543.71. The Standard & Poor’s 500 index rose 25.30, or 2.03 percent, to 1,274.31. And the Nasdaq composite index rose 3.91, or 1.92 percent, to 2,329.47.