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The markets tilted higher on Tuesday on the back of tame inflation data. But traders were cautious to make big moves ahead of the all-important Fed decision due Wednesday.
The Dow Jones Industrial Average rose 35 points, or 0.23%, to 15530, the S&P 500 gained 7.2 points, or 0.42%, to 1705 and the Nasdaq Composite advanced 27.9 points, or 0.75%, to 3746.
The broad markets started the week off on a strong note Monday, climbing after former Treasury Secretary Larry Summers bowed out of the race to become the next Federal Reserve chair. Wall Street continued paying close attention to the central bank Tuesday, with a two-day policy-setting meeting getting started on the day.
Traders expect the Fed to pare back its bond-buying program by $10 billion to $75 billion a month as it looks to keep its foot on the accelerator without causing the economy to overheat. However, a batch of weak jobs data, and somewhat tepid housing data, have blurred expectations to some extent. At the same time, price pressure has remained largely subdued, giving the Fed more wiggle room.
To that end, the Labor Department said consumer prices rose 0.1% in August from July, slightly missing economists’ expectations they would rise 0.2%. Prices were up by the same margin excluding the food and energy components, matching expectations.
"The weak inflation prints support the Fed in its efforts to stimulate the U.S. economy even though the composition and form of that stimulus may change," Dan Greenhaus, chief global strategist at BTIG wrote in an email to clients.
The closely-watched ZEW index of German investor sentiment also surged to 49.6 in September from 42 in August. The reading from Europe's powerhouse economy is emblematic of the economic recovery taking place across the embattled eurozone.
In corporate news, Microsoft (MSFT) upped its quarterly dividend by 5 cents, or 22%, to 28 cents a share. The software giant's board also approved a new $40 billion share buyback plan.
J.P. Morgan Chase (JPM) was said to face a fine of between $700 million and $800 million to settle U.S. and UK investigations into the massive 'London Whale' trading loss, according to multiple media reports. A spokesperson declined a FOX Business request for comment on the matter.
Elsewhere, U.S. crude oil prices fell $1.17, or 1.1%, to $105.42 a barrel. Wholesale New York Harbor gasoline sold off by 2% to $2.661 a gallon. Gold slumped $8.40, or 0.64%, to $1,309 a troy ounce.
The Euro Stoxx 50 fell 0.44% to 2882, the English FTSE 100 dipped 0.48% to 6591 and the German DAX slumped 0.25% to 8591.
In Asia, the Japanese Nikkei 225 slid 0.65% to 14312 and the Chinese Hang Seng ticked lower by 0.31% to 23181.