Updates to 14:50 EST

By Stephen Culp

NEW YORK, Dec 13 (Reuters) -U.S. stocks surged on Wednesday and benchmark Treasuryyields slipped to their lowest level since August after the Federal Reserve flagged the end of its tightening cycle and struck a dovish tone for the year ahead.

All three major U.S. stock indexes jumped sharply, on track to reach fresh closing highs for the year, after the Federal Open Markets Committee (FOMC) left its Fed funds target rate unchanged at 5.25%-5.50%.

In its accompanying statement , the U.S. central bank acknowledged that inflation has eased and implied that the rate tightening cycle might be over and hinted that lower borrowing costs could be in the cards in 2024.

"The Fed delivered an early holiday present this year," said Greg Bassuk, CEO at AXS Investments in New York. "Investors are embracing change in Fed sentiment toward a more dovish stance, it really underscores the trade that investors have been making over the last few weeks; that rates are set to decline in the coming year."

Economic data showed U.S. producer prices (PPI) were unchanged in November, further evidence that inflation continues to meander down toward the Fed's average annual 2% target.

"Some of the factors we believe that drove this change in sentiment is this week's CPI and PPI data showing more consistency in inflation's downward trajectory," Bassuk added. "This allowed the Fed to gain greater confidence that its hawkish moves have begun to achieve their objectives."

In a busy week for central banks, the European Central Bank and the Bank of England will announce policy decisions on Thursday.

The Dow Jones Industrial Average .DJI rose 372.14 points, or 1.02%, to 36,950.08, the S&P 500 .SPX gained 51.59 points, or 1.11%, at 4,695.29 and the Nasdaq Composite .IXIC added 167.40 points, or 1.15%, at 14,700.80.

European shares ended a subdued session with a nominal loss as investors largely avoided risky bets ahead of the Fed decision.

The pan-European STOXX 600 index .STOXX lost 0.06% and MSCI's gauge of stocks across the globe .MIWD00000PUS gained 1.05%.

Emerging market stocks rose 0.03%. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.08% higher, while Japan's Nikkei .N225 rose 0.25%.

Treasury yields tumbled after the Fed decision, which opened the door to interest rate cuts in 2024.

Benchmark 10-year notes US10YT=RR rose 51/32 in price to yield 4.0145%, from 4.206% late on Tuesday.

The 30-year bond US30YT=RR rose 76/32 in price to yield 4.1709%, from 4.304% late on Tuesday.

The dollar reversed its gains against a basket of world currencies .DXY, dropping after the central bank signaled an end to its tightening cycle.

The dollar index .DXY fell 0.81%, with the euro EUR= up 0.85% to $1.0884.

The Japanese yen strengthened 1.56% versus the greenback at 143.22 per dollar, while Sterling GBP= was last trading at $1.2621, up 0.48% on the day.

Oil prices bounced back after tumbling to near six-month lows on Tuesday in the wake of a larger-than-expected weekly withdrawal from U.S. crude storage and as an attack on a tanker in the Red Sea threatened Middle East oil supplies

U.S. crude CLcv1 rose 1.25% to settle at $69.47 per barrel, while Brent LCOcv1 settled at $74.26 per barrel, up 1.39% on the day.

Gold advanced in opposition to the weakened greenback.

Spot gold XAU= added 1.8% to $2,014.59 an ounce.

Reporting by Stephen Culp; Additonal reporting by Rae Wee in Singapore and Alun John in London; Editing by Kirsten Donovan and Richard Chang

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