Stocks Gain More than 1% Despite Uncertainty Ahead of Fed Meeting

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The New York Stock Exchange on July 27, 2015.Spencer Platt / Getty Images, file

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By Reuters

U.S. stocks rose more than 1 percent on Tuesday after data showed healthy growth in consumer spending. But the gains did little to remove uncertainty about whether the Federal Reserve will end seven years of near-zero interest rates when it meets this week.

The Dow Jones industrial average rose 228.89 points, or 1.4 percent, to 16,599.85, the S&P 500 gained 25.06 points, or 1.28 percent, to 1,978.09 and the Nasdaq Composite added 54.76 points, or 1.14 percent, to 4,860.52.

Speculation about when the Fed will begin to raise rates has dogged Wall Street for several months, with the picture complicated by recent market turbulence that some see as justification for the central bank to hold off.

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"The debate around the Fed continues but the Fed will do more damage waiting for December to raise rather than start the normalization process," said Art Hogan, chief market strategist at Wunderlich Securities. "If they don't raise rates this week, it's a bad signal."

The Commerce Department said core retail sales rose 0.4 percent in August after an upwardly revised 0.6 percent increase in July.

It was the latest sign of sturdy economic momentum and suggested the recent stock market sell-off had little immediate impact on U.S. household spending.

U.S. interest rates futures implied traders place a 27 percent chance the Fed would end its near-zero interest rate policy on Thursday, up from 23 percent late on Monday, according to CME Group's FedWatch program.

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"It's tough to call," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois. "In the context of the world economy and the uncertainty around China, they might give it another month."

Stocks have been volatile since China devalued its currency in August. The S&P 500 has had moves of at least 1 percent in more than 10 sessions since Aug. 20 and is down 4 percent for the year.