TORONTO - Stock markets finished with gains Wednesday following two days of declines, as hope strengthened that the American recession is moderating.

The U.S. Federal Reserve, at the end of its two-day meeting on monetary policy, said it sees signs the recession may be easing, but it warned that the economy is likely to remain weak.

Investors were already feeling positive despite data showing a steeper-than-expected contraction of the U.S. economy in the first quarter, at an annualized rate of 6.1 per cent.

"Hopefully this is the worst reading that we're going to get in 2009," said Paul Taylor, chief investment officer at BMO Harris Private Banking.

"And from here we rebuild."

Toronto's S&P/TSX composite index eased back from triple-digit gains to close ahead 68.28 points at 9,416.31.

The TSX Venture Exchange advanced 20.87 to 1,013.97 while weakness in the greenback sent the Canadian dollar ahead 1.20 cents to 83.13 cents US.

Wall Street's Dow Jones industrial average gained 168.78 points to 8,185.73 as the Fed held its key lending rate at a record low of between zero and 0.25 per cent. It also held off on any new steps to shore up the economy.

"The Fed still sees green shoots and believes the U.S. economy will begin to rebound later this year," observed Sherry Cooper, chief economist at BMO Capital Markets.

The Nasdaq composite index moved up 38.13 points to 1,711.94 while the S&P 500 index rose 18.48 to 873.64.

The U.S. Commerce Department's report of a 6.1 per cent rate of economic shrinkage in the January-March period was worse than the five per cent annualized decline markets were expecting, but it was slightly better than the 6.3 per cent rate of contraction in the fourth quarter. And personal consumption rose 2.2 per cent, the strongest growth rate in two years.

"The personal consumption data was certainly much better than had been expected, which leads us to believe that the improved consumer confidence data in fact could be sustainable," said Taylor.

Business inventories were also lower, he noted, and "at some point in time, this will lead to an inventory replenishment."

On the earnings front, Rogers Communications Inc. shares (TSX:RCI.B) were down 35 cents to $29.24 after weak advertising sales in its media division cut into first-quarter profit. Canada's biggest cable-TV and cellphone network operator earned $309 million for the quarter, down 10 per cent from a year-earlier.

Maple Leaf Foods Inc. (TSX:MFI) rose 15 cents to $8.60 after a first-quarter profit of $2.9 million, boosted by higher prices in its Canada Bread subsidiary. Margins are still shaky in packaged meat as recovery from last summer's tainted meat recall continues, but Maple Leaf's sales were up 6.3 per cent to $1.3 billion.

The Toronto base-metals sector was the biggest percentage advancer, up 5.5 per cent with Teck Resources Ltd. (TSX:TCK.B) ahead 83 cents to $12.01.

Sherritt International Corp. (TSX:S) posted a first-quarter loss of $42.9 million, reversing a year-ago profit of $89 million, after a $57.4 million loss on the sale of oil and gas assets. Revenue increased to $349 million from $314.2 million and Sherritt stock inched up two cents to $4.95.

Western Canadian Coal Corp. (TSX:WTN) rose another 48 per cent to $1.42, after a 23 per cent gain Tuesday on word of new sales contracts. It's still down from $10.99 last June.

The TSX energy sector was ahead 1.75 per cent. Oil prices rose even as the U.S. Energy Information Administration said crude inventories rose by 4.1 million barrels last week, far higher than the expected boost of 1.8 million.

The June crude contract on the New York Mercantile Exchange gained $1.05 to US$50.97 a barrel.

In Toronto, EnCana Corp. (TSX:ECA) improved $1.03 to $55.49 and Canadian Oil Sands Trust (TSX:COS.UN) ran ahead $1.25 to $26.30.

Talisman Energy Inc. (TSX:TLM) reported net income of $455 million for the quarter ended March 31, a two per cent decrease from a year ago. Its shares moved up $1 to $15.35.

Eveready Inc. (TSX:EIS) soared $6.93 or 200 per cent to $10.40 after a $464-million deal to be acquired by Clean Harbors Inc. (NYSE:CLH), North America's biggest handler of hazardous waste. The cash-and-stock arrangement values the Edmonton-based energy services company at $11 per share.

The June bullion contract on the Nymex was $6.90 higher to US$900.50 an ounce and the TSX gold sector edged up 0.4 per cent.

Barrick Gold Corp. (TSX:ABX) was five cents higher at $35.65 after a first-quarter profit of US$371 million, down from $514 million as the world's largest gold producer saw lower realized prices and higher costs.

Financials were ahead 0.7 per cent with Manulife (TSX:MFC) ahead 42 cents to $20.11 and CIBC (TSX:CM) up $1.25 to $54.90.