Stocks on Wall Street rose on Wednesday after the Federal Reserve said it would raise interest rates by a quarter of a percentage point, while simultaneously acknowledging that stress in the banking sector will also restrict the economy.

The S&P 500 rose sharply higher soon after the decision was announced, after trading was muted for most of the day. In the bond market, the two-year Treasury yield, which is sensitive to changes in interest rates, fell sharply to around 4 percent, as investors bet that Wednesday’s interest-rate increase would be the Fed’s last.

The swings suggested that Wall Street’s immediate response to the decision was one of relief. The tone could shift again, however, after the Fed chair, Jerome H. Powell, holds a news conference later and analysts are able to weigh in on the decision.

Reeling from a series of bank collapses that prompted intervention from regulators around the world and generated violent swings in financial markets, investors, analysts and economists had been left guessing about what the Fed might do on Wednesday, uncertainty that has been reflected in whipsaw trading over the past two weeks.

Typically, the Fed likes to set investors’ expectations, leading them to the likely outcome of rate decisions, limiting any potential market fallout from a surprise move.

Just days before regulators took control of Silicon Valley Bank, Mr. Powell testified to Congress that he was open to raising interest rates more quickly in response to data that showed inflation stubbornly embedded within the economy.

That led investors to pile into bets that the Fed would raise interest rates by a half point at Wednesday’s meeting, twice the amount the central bank raised rates in February. They also predicted that there would be a full percentage point of rate increases to follow, by the middle of the year.

But after the collapse of Silicon Valley Bank, which came about in part because of the effect of higher interest rates on bank balance sheets, investors tempered those bets, tilting toward an expectation of a quarter-point increase at Wednesday’s meeting but leaving the door open to a larger increase.

After another week of banking turmoil that reverberated around the world, many had begun to believe that the Fed could instead leave rates unchanged. On Wednesday morning, PacWest, a Los Angeles lender that has come under pressure alongside other regional banks, said it had tapped emergency cash after a 20 percent drop in its deposits since the start of the year.

The announcement sent PacWest’s stock price tumbling, down 10 percent for the day, dragging the share prices of other regional banks lower as well. The moves illustrated the tumultuous backdrop clouding investors view of the Fed’s plans for interest rates.