Stocks gain as 2-day Fed meeting begins

U.S. stocks rallied Tuesday as the Federal Reserve kicked off its two-day policy meeting and Saudi Arabia said it will fully restore oil production by the end of the month.

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All three of the major averages gained, with the Nasdaq pacing the advance.

TickerSecurityLastChangeChange %
I:DJIDOW JONES AVERAGES27024.8+237.44+0.89%
SP500S&P 5002995.68+29.53+1.00%
I:COMPNASDAQ COMPOSITE INDEX8148.705552+100.06+1.24%

The Federal Reserve on Tuesday began its two-day policy meeting. The U.S. central bank on Wednesday is expected to cut its benchmark interest rate by 25 basis points to a range between 1.75 percent and 2 percent. A rate cut would be the second by the Fed since the financial crisis after cutting rates at its last meeting in July.

On Tuesday afternoon, Saudi energy minister Prince Abdulaziz bin Salman said the kingdom expects to have oil production at full capacity by the end of the month after weekend drone attacks took half of its output offline.

Saudi Arabia was producing 9.6 million barrels of oil per day, or about 10 percent of the world's daily production, ahead of the attacks. It expects to ramp production up to 11 million bpd by the end of the month.

West Texas Intermediate and Brent crude oils fell 6.1 percent and 7.16 percent, respectively, and dragged energy names lower. They gained more than 14 percent apiece on Monday.

TickerSecurityLastChangeChange %
XOMEXXON MOBIL CORPORATION69.42+0.24+0.35%
CVXCHEVRON CORP.116.31+0.13+0.11%

Airlines stocks bounced back after higher energy prices were a headwind on Monday, with both American Airlines and United Airlines gaining ground.

TickerSecurityLastChangeChange %
AALAMERICAN AIRLINES GROUP INC.28.27+0.66+2.37%
UALUNITED AIRLINES HLDG.87.88+0.91+1.05%

Elsewhere, General Motors shares recouped some of Monday's losses, which came after more than 49,000 United Auto Workers members went on strike.

TickerSecurityLastChangeChange %
GMGENERAL MOTORS COMPANY36.26+0.76+2.14%

On the data front, U.S. manufacturing production bounced back in August, growing at a 0.6 percent pace, according to the Federal Reserve. It grew 0.4 percent in July.

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In Europe, Germany's DAX was down 0.51 percent to pace the decline. Overnight, Japan's Nikkei tacked on 0.1 percent for a 10th straight day of gains while Hong Kong's Hang Seng shed 1.2 percent after the credit ratings agency Moody's downgraded the city.

Ken Martin contributed to this article.