By Rodrigo Campos
NEW YORK (Reuters) - U.S. stocks rose in a volatile Tuesday session as energy shares rallied and investors bet the Federal Reserve will be cautious in removing support in the face of a more fragile global economy.
Futures had crumbled in early trading as the ruble neared 80 per U.S. dollar, down 21 percent. The Russian currency sharply pared its losses and was down about 3 percent, near 68 per dollar.
Brent crude fell as much as 4.2 percent but was last down 1.2 percent at $60.36 a barrel. U.S. crude, which fell as much as 4.1 percent, was recently up 0.2 percent at $56.04 a barrel after gaining as much as 2.2 percent.
Energy shares, up 2.9 percent, were the largest gainers on the S&P 500.
"There were many, many stocks, especially in the energy sector that were just trading at absolutely ridiculous prices to their fair market valuation," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
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"That is really what started the rally, when investors really started to come into the energy stocks."
Chevron, up 2.6 percent, was leading the points advance in the sector. Chevron's forward price-to-earnings ratio was at 13.6 at the close on Monday, compared to the S&P 500's 16.1, meaning investors pay less for every dollar of Chevron's earnings than they do for the S&P 500 overall.
Among the top percentage gainers, Nabors Industries, up 7.6 percent, had a forward P/E of 8.6, while Denbury Resources' P/E was 8.9. Denbury rose 8.4 percent.
The 43 components of the S&P 500 energy sector were in positive territory.
At 12:57 p.m. EST (1757 GMT) the Dow Jones industrial average rose 118.86 points, or 0.69 percent, to 17,299.7, the S&P 500 gained 12.12 points, or 0.61 percent, to 2,001.75 and the Nasdaq Composite added 11.51 points, or 0.25 percent, to 4,616.67.
Market participants also said bets on the Federal Reserve's next move were giving stocks support. Fed officials will decide this week whether to make a critical change to their policy statement that would widen the door for interest rate hikes next year. In October, The Fed repeated that benchmark rates were unlikely to rise for a "considerable time."
"Perhaps markets think the Fed will not be as on-schedule on taking out that language," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
She said the market is betting the Fed will give consideration to rapidly changing financial conditions. A Fed statement and news conference are expected on Wednesday.
CVS Health Corp, rose 3.8 percent to $94.14 after a strong 2015 forecast. 3M lifted its dividend and was the top points gainer on the Dow industrials with a 2.2 percent advance.
Boeing, up 2.4 percent at $124.95, was among the best performers after it raised its dividend and perked up its buyback program.
NYSE advancing issues outnumbered decliners 2,018 to 996, for a 2.03-to-1 ratio; on the Nasdaq, 1,714 issues rose and 945 fell for a 1.81-to-1 ratio.
The S&P 500 was posting 10 new 52-week highs and 39 lows; the Nasdaq Composite was recording 22 new highs and 154 lows.
(Additional reporting by Chuck Mikolajczak; editing by Chizu Nomiyama, Nick Zieminski and Meredith Mazzilli)