Stocks closed sharply higher yesterday after the Federal Reserve raised rates for the third time this year and indicated that the latest increase may slow the nation's rapid economic growth.

At the close of a volatile session on Wall Street, the Standard and Poor's 500 and the Nasdaq composite index were at new closing records. The former 25.07 to 1,419.46, and the Nasdaq rose 67.87 to 3,287.41.

The Dow Jones industrial average rose 171.88 to 10,932.63, its highest close since September 13, when the index closed at 11,030.33.

Advancing issues outnumbered decliners by a three-to-two margin on the New York Stock Exchange, with 1,816 up, 1,250 down and 512 unchanged.