US open: US stocks in the black as oil prices rebound; Fed decision eyed

US stocks rose on Tuesday as oil prices recovered and investors looked ahead to the Federal Reserve’s rate announcement.

At 1540 GMT, the Dow Jones Industrial Average was 1% higher, the S&P 500 was up 1.1% and the Nasdaq was 1.2% firmer.

Energy shares got a break as oil prices rebounded from heavy falls in the previous session, with West Texas Intermediate up 1.6% to $36.88 and Brent crude up 1.8% to $38.61 a barrel.

With the Fed's rate decision due on Wednesday, investors digested a slew of US data releases.

Figures released earlier by the Bureau of Labor Statistics showed US inflation rose 0.5% in November from a year ago, matching analysts' estimates and marking an improvement from the previous month's 0.2% increase.

Excluding the two volatile components, the consumer price index climbed 2% year-on-year in November as expected, following a 1.9% gain a month earlier.

However, CPI fell to 0% in November on a month-on-month comparison, after a 0.2% rise in October, meeting forecasts.

James Hughes, chief market analyst at GKFX, said the improvement in year-on-year inflation paves the way for the Federal Reserve to raise interest rates.

Elsewhere, sentiment among US housebuilders remained fairly flat in December.

The National Association of Home Builders/Wells Fargo housing market index nudged down one point to 61, a touch below estimates for a reading of 62 but comfortably above the 50 threshold that indicates improvement.

The component gauging current sales conditions dropped one point to 66, while the index charting buyer traffic dropped two points to 46.

Finally, a reading on manufacturing conditions in the New York area revealed a smaller contraction in December.

The Empire State general business conditions index moved up to a reading of -4.6 from -10.7 in November, its best level since July and better than expectations for -7.5.

“In one line: Less bad, but still pretty grim,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Michael Hewson, senior market analyst at CMC Markets, noted that the Fed Funds Implied Probability indicator suggests that there is a 78% possibility of a rate increase and that there have been “clear signals” in recent weeks that US officials are preparing for such a move.

“It has also been suggested that the recent surprise decision by the European Central Bank to be more cautious about pushing extra stimulus into the financial system may have been rooted in concerns that too aggressive a move might well have caused the Fed to delay a move on rates,” he said.

In company news, FactSet Research Systems was on the back foot after its first quarter revenues fell short of expectations.

3M was also under the cosh as investors digested a weak earnings outlook from the company.

On the upside, Sirius XM Holdings rallied after the satellite radio operator said it has signed Howard Stern to another five-year deal.

The dollar was 0.5% higher against the euro, the pound and the yen, while spot gold was 0.4% firmer at $1,063.56.