Stocks were initially mixed as investors digested the Fed's pivotal decision to raise interest rates by 75 basis points, the biggest rate hike since 1994.

But after Fed Chairman Jerome Powell acknowledged that the rate hike was "an unusually large one" and he "doesn't expect moves of this size to be common" stocks shot up.

The Dow Jones Industrial Average closed 303 points higher, or 1%. And the S&P 500, which fell into a bear market earlier this week, closed 54 points higher or 1.5%. While the Nasdaq Composite closed 270 points higher, or 2.5%. Yields on 10-year Treasury notes fell by more than 170 basis points as investors bought more bonds driving the price up. Bond yields fall as prices rise.

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Crypto crash

Cryptocurrency prices continued to sink, and bitcoin dropped as low as $20,087.90, nearly 71% below its record of $68,990.90 set late last year. It was down 2.2% at $21,652 in afternoon trading, according to CoinDesk.

Its tumble has worsened as investors ramp up their expectations for how aggressively the Fed will move on interest rates.

Fed provides more clarity on rate hikes

Before Friday's Consumer Price Index revealed that inflation hadn't peaked in April, the Fed was widely expected to raise interest rates by 50 basis points. But that tone quickly shifted on Monday, when more economists began to predict a 75 basis point hike.

Powell said that inflation, once again, "surprised" the central bank "to the upside" which merited a heftier rate hike than it had planned.

"It took a while, but Jerome Powell finally got the memo on inflation," said David Russell, VP of market intelligence at TradeStation Group. "The good news is that Wednesday's Fed announcement reduces uncertainty, which the market hates. The bad news is that we still have several big rate hikes ahead of us and little clear evidence yet of inflation cooling off," he wrote in a note published after the Fed decision.

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But the pressing question for the economic outlook is how long it will take and how much pain will Americans have to endure to see inflation move closer to the Fed's 2% target?

Powell said he's prepared to do another 75 basis point hike next month and reiterated his desire to achieve "a soft landing", meaning that inflation cools off without damaging other parts of the economy like employment in the process.

The economy is still largely holding up amid a red-hot job market, but it has shown some signs of distress recently. A preliminary reading on consumer sentiment last week, for example, sank to its lowest reading on record due in large part to high gasoline prices.

"The longer it takes the Fed to bring inflation to heel, the odds of achieving a soft landing become incrementally more challenging, since a more aggressive tightening may incite macroeconomic risks that result from an increasingly restrictive posture," Jason Pride, chief investment officer of private wealth at Glenmede wrote in a note.

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Tim Holland, chief Investment officer at Orion Advisor Solutions worries the Fed will move too fast to hike interest rates, which would put more downward pressure on markets put "the economy at risk of recession.”

The Associated Press contributed to this piece

This article originally appeared on USA TODAY: S&P 500, Dow, Nasdaq closed higher as Fed's Powell reassured investors