Wall Street rises on gains in healthcare stocks; Fed eyed

By Yashaswini Swamynathan

(Reuters) - Wall Street was higher on Tuesday afternoon, helped by gains in healthcare stocks and an overall sentiment that the U.S. Federal Reserve might not raise interest rates.

Though the Fed is not expected to raise rates in a two-day meeting, Chair Janet Yellen's speech on Wednesday is keenly awaited for any clues about rate changes in the coming months.

Traders have priced in a mere 18 percent chance for a rate hike by Wednesday, according to The CME Group's FedWatch tool.

Investors are also keeping an eye on the Bank of Japan's policy meeting that ends on Wednesday.

"Investors have become more comfortable knowing that a Fed rate hike decision will be put off until future meetings, but there is more uncertainty with what Japan will do," said Paul Springmeyer, investment managing director at the Private Client Group, U.S. Bank in Minneapolis, Minnesota.

Adding to a slew of lackluster economic data, a report on Tuesday showed U.S. housing starts fell more than expected in August as building activity declined broadly after two straight months of solid increases.

"I think (housing data) helps solidify the position for the Fed to hold rates," Springmeyer said.

The healthcare sector provided the biggest boost to the S&P 500 index, following Allergan's $1.7 billion acquisition, which has the markets speculating about the company's next deal move.

The healthcare sector rose 0.58 percent, far outdoing the other 10 major S&P indexes, following Allergan's $1.7 billion acquisition, which has left the markets speculating about the company's next deal move. Tobira Therapeutics' stock vaulted 700 percent after Allergan agreed to buy the company, to gain in access to its experimental drugs for NASH, an incurable fatty liver disease.

Gilead, which has a number of NASH drugs in its pipeline, rose 3.1 percent on the announcement and was the top boost on the S&P and the Nasdaq.

At 12:27 a.m. ET (1627 GMT), the Dow Jones Industrial Average was up 55.34 points, or 0.31 percent, at 18,175.51.

The S&P 500 was up 5.2 points, or 0.24 percent, at 2,144.32.

The Nasdaq Composite was up 11.65 points, or 0.22 percent, at 5,246.68.

DTS soared 23.2 percent to $42.29 after Tessera Tech agreed to buy the audio equipment maker for $850 million in cash. Tessera's stock was up 2.7 percent.

Marriott International received a go-ahead from Chinese regulators for its acquisition of Starwood Hotels. Shares of both the companies were up 2.3 percent.

Advancing issues outnumbered decliners on the NYSE by 1,593 to 1,310. On the Nasdaq, 1,524 issues rose and 1,155 fell.

The S&P 500 index showed three new 52-week highs and three new lows, while the Nasdaq recorded 63 new highs and 26 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Don Sebastian)