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Stocks end higher after Fed keeps interest rates unchanged

U.S. stocks are closing higher after the Federal Reserve said it would keep its benchmark rate unchanged.

The Dow Jones industrial average rose 121 points, or 0.7 percent, to 17,751 Wednesday.

The Standard & Poor's 500 index gained 15 points, or 0.7 percent, to 2,108. The Nasdaq composite climbed 22 points, or 0.4 percent, to 5,111.

Northrop Grumman led defense companies higher after it reported strong earnings and raised its outlook for the year.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.29 percent.

The dollar rose against the euro and the yen.

Facebook's second-quarter revenue barely squeaked past Wall Street's outsized expectations, sending its high-flying stock down in after-hours trading.

While the results surpassed forecasts on all fronts, some investors may have been looking for a bigger beat, or simply cashing in on some profits as Facebook's shares have been trading near record highs. The world's largest online social network continued to expand its massive user base, reaching 1.49 billion monthly users as of June 30, up 13 percent from a year earlier.

Facebook said mobile advertising represented more than three-quarters of advertising revenue during the April-June period, proof that the company continues to attract advertisers to where its users are - on smartphones and other hand-held gadgets.

Menlo Park, California-based Facebook Inc. said Wednesday that it had 1.31 billion monthly mobile users as of the end of the quarter, up 23 percent from a year earlier. In addition, there were 968 million daily active users overall and 844 million on mobile devices.

"Once again Facebook has proven its ability to attract and retain users. It's particularly impressive that users are more engaged than ever before - that the percentage of monthly users who visit every day continues to grow," said Forrester Research analyst Nate Elliott.

Tepid user growth and ongoing uncertainty about its leadership dragged Twitter's stock to its lowest level in over a year Wednesday, even though the short-messaging service reported sharply quarterly higher revenue.

Twitter is "not satisfied" with its user growth, co-founder Jack Dorsey, who replaced Dick Costolo as CEO earlier this month, said Tuesday after the earnings report. But that's unlikely to change any time soon.

Twitter doesn't expect to see "sustained, meaningful growth" of its number of users until it reaches the mass market, said Chief Financial Officer Anthony Noto. This, he said, will take considerable time.

While the company is planning to boost its marketing efforts to lure in new users, Noto also acknowledged that the site remains too difficult to use for many people.

On average, Twitter had 316 million monthly active users in the second quarter, up less than 3 percent from the previous three months.

"Stagnant user growth suggests Twitter is still trying to find its place in the social media food chain," said Colin Sebastian, an analyst at Baird Equity Research, in a note to investors.

While Twitter's quarterly results easily surpassed Wall Street's expectations, the analyst said the company's potential "remains in question due to the perceived 'niche' adoption when compared to other social media peers" such as Facebook with its nearly 1.5 billion monthly users, or Snapchat with its 100 million daily users.

Nonetheless, Cantor Fitzgerald analyst Youssef Squali said Twitter's long-term potential remains intact, helped by its unique offering as "the largest real-time broadcasting platform" as well as its "growing level of monetization."

The San Francisco-based company's stock fell $5.08, or 14 percent, to $31.46 in afternoon trading on Wednesday, hitting its lowest levels since May 2014. The stock is down 12 percent since the beginning of the year. In comparison, the Standard & Poor's 500 index is up 2.4 percent year to date.
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