U.S. stocks extended a recent rally on Friday, as the Federal Reserve's decision to keep the interest rates unchanged continued to drive the stock market.

The Dow Jones Industrial Average rose 120.81 points, or 0.69 percent, to 17,602.30. The S&P 500 gained 8.97 points, or 0.44 percent, to 2,049.56. The Nasdaq Composite Index added 20.66 points, or 0.43 percent, to 4,795.65.

The Fed kept its benchmark short-term interest rates unchanged earlier this week as widely expected, noting that "global economic and financial developments continue to pose risks" to the U.S. economy.

The Fed's updated projections showed that policymakers expected the federal funds rate to rise to around 0.9 percent at the end of 2016, implying two quarter-percentage-point rate increases this year, down from four estimated in December.

"The Fed has strayed furthest from the expectations in the market late last year. The result is a 4.7% drop in the major-currency trade-weighted dollar index since its January 19 high," said Chris Low, chief economist at FTN Financial.

A weaker dollar will hurt U.S. trade partners in the short run, but lower global interest rates, in part thanks to the Fed's failure to hike, is expected to benefit the global economy, he said.

On the economic front, the preliminary reading of consumer sentiment index published by Thomson Reuters/University of Michigan came in at 90.0 for March, worse than market estimates of 92.2.

Overseas, Chinese shares gained across-the-board on Friday as the real estate industry warmed and yuan strengthened. The benchmark Shanghai Composite Index gained 1.73 percent to 2,955.15 points.

European equities closed mostly higher Friday amid oil volatility. German benchmark DAX index at Frankfurt Stock Exchange rose 0.59 percent, while French benchmark index CAC 40 added 0.44 percent.

In a weekly basis, all three major indices extended their winning streak to a fifth straight week, with the Dow, the S&P 500 and the Nasdaq going up 2.3 percent, 1.4 percent and 1.0 percent, respectively.

The CBOE Volatility Index, often referred to as Wall Street's fear gauge, decreased 2.91 percent to end at 14.02 on Friday.

In other markets, oil prices dropped on profit-taking after a two-day rally.

The West Texas Intermediate for April delivery moved down 76 U.S. cents to settle at 39.44 dollars a barrel on the New York Mercantile Exchange, while Brent crude for May delivery decreased 34 cents to close at 41.2 dollars a barrel on the London ICE Futures Exchange.

The U.S. dollar rebounded from losses for two consecutive sessions after the Fed statement.

In late New York trading, the euro fell to 1.1270 dollars from 1.1318 dollars in the previous session, while the dollar bought 111.57 Japanese yen, higher than 111.43 yen of the previous session.

Gold futures on the COMEX division of the New York Mercantile Exchange fell as the U.S. dollar showed strength.

The most active gold contract for April delivery fell 10.7 dollars, or 0.85 percent, to settle at 1,254.30 dollars per ounce.

Source: Xinhua