Stocks bounced wildly soon after the announcement of the rise, soaring initially, then quickly plunging as traders cashed in.

But by the end of Tuesday's session, both the technology-heavy Nasdaq and the S&P had hit record highs. New York's main index, the Dow Jones, also staged a strong rally, gaining 172 ponits.

The Federal Reserve raised interest rates 0.25% to 5.5%, saying it was moving to a neutral bias, suggesting there were no more rises immediately in the pipeline.

Within minutes of the rate rise news, the Dow Jones index leaped nearly 30 points, from 10,838 to 10,866.

Many leading stocks were among those rising amid frantic trading.

But as markets started to fall again, the index hit 10,760 ten minutes after the Federal Reserve's decision.

Prices then rose again and the Dow closed at 10,932.63 - a near-record high.

The swings were dubbed a "battle between the bulls and the bears".

The Nasdaq rose 73 points on the session, ending at a record high of 3,292.

The S&P also hit a closing high - of 1,419.95.

European markets, however, did not share in the enthusiasm, with stocks rising only

At lunchtime the stock on Europe's leading exchange in London were down modestly. The FTSE was down 35 points at 6,548 by 1400GMT. Profit taking was seen as European markets have hit record highs in the past week.