US open: Stocks rally before Fed rate decision

The Dow rose 1.67%, the Nasdaq increased 1.69% and the S&P 500 climbed 1.78%.

The Fed is widely expected to raise interest rates for the first time in nearly a decade by 25 basis points. The outcome of the policy meeting will be announced at 1900 GMT and a press conference will be held at 1930 GMT.

“Whatever the decision, I expect to see plenty of volatility in the markets, especially as investors attempt to correctly interpret Chair Janet Yellen’s comments in the press conference which follows,” said Craig Erlam, senior market analyst at Oanda.

“Of course, the most volatility would likely come if the Fed gets cold feet like its European counterparts and pulls the plug altogether,” he added referring to the European Central Bank’s decision to leave monthly asset purchases unchanged at €60bn and the Bank of England’s decision to hold on interest rates.

In other events, US mortgage applications fell 1.1% in the week to 11 December, following a 1.2% increase the previous week, according to the Mortgage Bankers’ Association.

US housing starts rebounded in November from a seven-month low, rising 10.5% to 1.17m units, the Commerce Department revealed. Analysts had expected 1.13m units. October's starts were largely unchanged at a 1.06m.

US industrial production fell 0.6% in November, worse than forecasts for a 0.2% drop and the previous month’s 0.3% decrease.

Still to come, Markit releases its purchasing managers’ index on manufacturing at 1445 GMT.

Elsewhere, the People’s Bank of China said economic growth in the world’s second-largest economy is expected to slow to 6.8% in 2016. The PBoC attributed the slight slowdown to industrial overcapacity, rising bad loans from banks and sluggish demand for the nation's goods.

In company news, Walt Disney rallied as Star Wars hit screens worldwide and was well received by critics.

Payment processor Heartland Payment was on the front foot after agreeing to be bought by Global Payments for $4.3bn.

CVS Health Corp. jumped after it revised up its 2016 adjusted earnings-per-share outlook to between $5.73 and $5.88 from between $5.68 and $5.88.

Chipotle Mexican Grill advanced after it said it plans to decrease its use of locally sourced ingredients to try and win back customers scared off by an E.coli outbreak.

In commodities, West Texas Intermediate slipped 1.1% to $36.88 per barrel and Brent crude fell 2.07% to $37.67 per barrel at 1410 GMT.

Metal prices on the other hand were sitting higher on the Comex with gold up 0.89%, silver up 2.21% and copper up 1.39%.

The dollar was down 0.4% against the euro but up 0.06% against the pound and up 0.15% against the yen.