US STOCKS-Fed's steady on rates, oil drops and market gains

* Fed keeps benchmark fed funds rate unchanged
* Boeing shares slide on Goldman rating
* Oil falls over $2 on unexpected rise in crude inventory

By Kristina Cooke

NEW YORK, June 25 (Reuters) - U.S. stocks rose on Wednesday, as the price of oil declined, while the Federal Reserve held its key interest rate steady and reduced expectations for a rate hike at its next meeting.

The S&P 500 and Nasdaq rose more than the Dow, which was little changed. Boeing Co weighed on the blue-chip Dow average after Goldman Sachs recommended investors sell the plane maker's shares, given falling orders and high fuel prices.

The Fed boosted optimism among stock investors when it said in its accompanying statement that downside risks to growth appeared to have diminished somewhat.

It was the first time the U.S. central bank has held rates steady since embarking in September on a series of rate reductions to stimulate an economy grappling with a housing downturn and credit crisis.

"The market seems to be reading into it that we're not going to get an aggressive increase in interest rates soon, that it's steady as she goes in terms of monetary policy," said Craig Hester, CEO of Hester Capital Management in Austin, Texas.

The pullback in oil prices added to the positive mood as did a stronger-than-expected quarterly profit from Jabil Circuit, a contract electronics maker. Jabil's stock shot up about 16 percent.

The Dow Jones industrial average .DJI edged up 4.40 points, or 0.04 percent, to close at 11,811.83. The Standard & Poor's 500 Index .SPX rose 7.68 points, or 0.58 percent, to 1,321.97. The Nasdaq Composite Index .IXIC rose the most, up 32.98 points, or 1.39 percent, at 2,401.26.
Boeing shares tumbled 6.9 percent to $69.94 and were the top drag on the Dow.

The nosedive by Boeing's stock helped tip the Dow briefly into negative territory in the final half hour of trading, but the Dow managed to reverse that to eke out a tiny gain for the day.

Among tech stocks, iPod maker Apple Inc gained 2.4 percent to $177.39 on the Nasdaq.

Jabil Circuit climbed 15.6 percent to $16.57 on the New York Stock Exchange.

U.S. crude CLc1 dropped $2.45, or 1.8 percent, to $134.55 per barrel, after an unexpected rise in U.S. crude inventories as high fuel prices continued to erode demand.

Trading was light on the New York Stock Exchange, with about 1.40 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.15 billion shares traded, also short of last year's daily average of 2.17 billion.

Advancing stocks outnumbered declining ones by a ratio of about 2 to 1 on the NYSE and by about 9 to 5 on Nasdaq.

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