STOCK prices soared briefly yesterday after the Federal Reserve decided to keep interest rates steady, but the market quickly retreated as investors assessed the implications of the central bank's move.

Bonds also jumped at first before surrendering some of their gains, but the dollar drew sustained selling pressure.

The Dow Jones industrial average closed 20.71 points lower at 5,874.03 after initially gaining 35 points on the Fed's decision.

The decision surprised some Wall Street analysts who had expected the central bank to raise rates for the first time in 1-1/2 years. Prior to the Fed's decision, the Dow index had hovered around unchanged.

In the bond market, the 30-year Treasury bond was up 12/32 after initially rising nearly half a point, and its yield fell to 6.99 per cent from 7.02 per cent at Monday's close. Analysts said the stock market had already priced in a quarter-point rise in interest rates.