* Fed leaves rates unchanged amid global concerns
* Indexes hit highs, then pare gains as Yellen takes questions
* Trading volatile after Fed statement
* Dow and S&P 500 close to unchanged; Nasdaq gains (Adds comment, updates prices)
By Sinead Carew
Sept 17 (Reuters) - Wall Street gave up a more than 1 percent rally on Thursday as investors struggled to interpret the Federal Reserve's decision to hold off on raising interest rates.
The U.S. central bank said global risks and other factors had convinced it to delay what would have been the first rate hike in nearly a decade but it left open the possibility of a modest policy tightening later this year.
Investors' focus turned to the next Fed meeting on Oct. 27-28 and they were still left to figure out the timing for the Fed's first benchmark rate increase since 2006.
The three major U.S. indexes all hit session highs, rising more than 1 percent for a while during Fed Chair Janet Yellen's 2.30 p.m. press conference. Trading right after the Fed's 2 p.m. statement release was choppy with the major U.S. indexes first hitting session highs and briefly turning negative before reversing course and turning positive again.
"There's a little bit of relief obviously that it's not happening today, but there are questions and head-scratching as to when it will happen. There are some hints or guidance there that potentially, a Fed rate hike may not even happen this year," said George Rusnak, Co-Head Of Global Fixed Income for Wells Fargo Investment Institute In Princeton, New Jersey.
While some commentators said they were disappointed with the continued uncertainty, others showed relief.
Uncertainty about when the Fed will shift gears has dogged Wall Street for months - a situation that has been complicated in recent weeks by market turbulence linked to slowing growth in China and worries about the health of the global economy.
"There was just too much global uncertainty right now, and the risk of raising rates from zero is different from raising rates if you're at 4 percent," said Steve Gutch, Senior Portfolio Manager, Federated Investors, Rochester, New York who expects market volatility to continue will investors wait again.
At 3:29 p.m., the Dow Jones industrial average fell 18.17 points, or 0.11 percent, to 16,721.78, the S&P 500 lost 0.37 points, or 0.02 percent, to 1,994.94 and the Nasdaq Composite added 14.87 points, or 0.3 percent, to 4,904.11.
Ahead of the news, U.S. interest rates futures had indicated a 25 percent chance the central bank would raise rates on Thursday, while 35 of 80 economists polled by Reuters earlier this week said they expected an increase.
Five of the 10 major S&P sectors were higher, with the utilities index's 1.5 percent rise leading the way. The financial services index turned down during Yellen's comments and was off 1.1 percent the telecommunications index was off 1.3 percent.
Advancing issues outnumbered declining ones on the NYSE by 1,899 to 1,136, for a 1.67-to-1 ratio on the upside; on the Nasdaq, 1,552 issues rose and 1,233 fell for a 1.26-to-1 ratio favoring advancers.
The S&P 500 posted 15 new 52-week highs and 2 new lows; the Nasdaq recorded 55 new highs and 28 new lows. (Additional reporting by Sam Forgione, Gertrude Chavez-Dreyfuss and Caroline Valetkevitch in New York,; Editing by Ted Kerr and Nick Zieminski)