By Tanya Agrawal
REUTERS - Energy stocks lifted Wall Street on Wednesday after a 5 percent jump in oil prices, even as investors braced for the Federal Reserve's decision on an interest rate hike.
The Fed will decide on Thursday after a two-day meeting.
Speculation about when the Fed will end seven years of near-zero interest rates has dogged Wall Street for months, with the picture complicated by recent market turbulence that some see as justification for the central bank to stand pat.
Fed fund futures see only a 30 percent chance that Janet Yellen and her colleagues will pull the trigger this week. Of the 80 economists polled by Reuters, only 35 said the central bank is likely to raise rates this week.
At 11:32 a.m. ET (1532 GMT) the Dow Jones industrial average was up 97.17 points, or 0.59 percent, at 16,697.02, the S&P 500 was up 11.75 points, or 0.59 percent, at 1,989.84 and the Nasdaq Composite was up 16.68 points, or 0.34 percent, at 4,877.20.
Nine of the 10 major S&P sectors were higher, with the energy index's 2.36 percent rise leading the advancers. Oil prices jumped about 5 percent after an unexpected drawdown in U.S. stockpiles. Exxon's 1.6 percent rise provided the biggest boost to the Dow and the S&P 500.
Stocks have been volatile since China devalued its currency in August. The S&P 500 has had moves of at least 1 percent in 12 of the past 18 sessions.
On Tuesday, the CBOE Volatility index - popularly known as the "fear index" - closed above 22 for the 17th consecutive day, the longest it has lingered above that level in nearly four years. The long-term average is 20.
"The volatility will continue until the Fed takes control of the policy and does what they've been thinking about or talking about for the better part of two years," said John Brady, managing director at R.J. O'Brien & Associates in Chicago.
Data on Wednesday showed that U.S. consumer prices unexpectedly fell in August as gasoline prices resumed their decline and a strong dollar curbed the cost of other goods.
The consumer price index slipped 0.1 percent last month. Economists polled by Reuters had forecast the CPI would be unchanged in August.
The Fed will pay special attention to the labor market and inflation as it decides on a rate hike. While the job market has continued to gain strength, inflation remains below the 2 percent target set by the central bank.
The Organization for Economic Cooperation and Development trimmed its growth outlook for the global economy but said the United States is doing well enough that its central bank should go ahead with a rate increase.
"Raising interest rates now would remove uncertainty in the markets," OECD chief economist Catherine Mann said, adding that what the Fed did afterwards would matter far more than the initial move.
Shares of Hewlett-Packard were up 4.2 percent at $28.25. The company said it would cut up to 33,300 jobs.
FedEx was down 3.8 percent at $148.10 after the package delivery company cut its 2016 profit forecast.
U.S.-listed shares of Anheuser-Busch InBev were up 5.2 percent at $113.70 after the world's biggest beer maker approached rival SABMiller about a takeover.
Molson Coors jumped 12 percent, while Altria, which owns a 27 percent stake in SABMiller, was up about 1.5 percent.
Advancing issues outnumbered decliners on the NYSE by 1,942 to 897. On the Nasdaq, 1,398 issues rose and 1,194 fell.
The S&P 500 index showed three new 52-week highs and one new low, while the Nasdaq recorded 26 new highs and 18 new lows.
(Reporting by Tanya Agrawal; Editing by Don Sebastian)
