NEW YORK, Feb. 23 (Xinhua) -- U.S. stocks traded higher on Friday, as investors digested the central bank's newly-released monetary policy report.

The Dow Jones Industrial Average gained 347.51 points, or 1.39 percent, to 25,309.99. The S&P 500 increased 43.34 points, or 1.60 percent, to 2,747.30. The Nasdaq Composite Index was up 127.31 points, or 1.77 percent, to 7,337.39.

The Fed is expected to continue gradual interest rate hikes this year on the expectation of stronger economic outlook.

"The (Federal Open Market) Committee expects that the ongoing strength in the economy will warrant further gradual increases in the federal funds rate," said the semiannual Monetary Policy Report to the Congress.

The report was released before new Fed chair Jerome Powell's first Congress testimony which was scheduled on Feb. 27.

Despite the recent market turbulence, the Fed still held that overall vulnerabilities in the U.S. financial system remain moderate on balance.

However, it warned that valuation pressures continue to be elevated across a range of assets, including equities and real estate.

In their public remarks, Fed officials have downplayed the impact of recent market volatility, saying they would stick to their forecast of stronger growth outlook and gradual rate hike pace.

The market has been closely following any updates from the Fed.

On Wednesday, the U.S. central bank released minutes from its January meeting. According to the minutes, the Fed officials see increased economic growth and an uptick in inflation as justification to continue to raise interest rates gradually.

After the news came out, the U.S. 10-year Treasury yield spiked to as high as 2.956 percent. Major stock indices rose sharply with the Dow jumping more than 300 points before paring gains completely.

For Chinese companies listed in the United States, shares of Chinese e-commerce giant Alibaba gained 2.45 percent to settle at 193.37 dollars, while shares of another Chinese technology company Baidu increased 0.56 percent to close at 250.74 dollars. Enditem