Stocks climb on hopes for Fed, Chinese stimulus

U.S. stocks jumped on Tuesday, lifting the Dow industrials to a record, as oil and other commodities surged on a report that China's central bank would increase stimulus and on the view that the Federal Reserve would not rush to hike rates.

Stocks turned decisively higher during a webcast on the Wall Street Journal's website, in which journalist Jon Hilsenrath made the argument that the Fed would keep its "significant underutilization" of labor market resources in its expected statement on Wednesday, said Peter Boockvar, chief market analyst at the Lindsey Group.

The Fed's two-day policy meeting ends on Wednesday, with the central bank expected to release a statement at 2 p.m. Eastern, and a news conference 30 minutes later.

"It's just his opinion, but the timing coincided," said Boockvar. Hilsenrath is widely seen as being exceptionally close to Fed officials, and his stories have moved markets in the past.

The headlines fueled thinking that the Fed would stick with wording indicating it would wait a "considerable period as opposed to a quicker tightening and a rate hike," said Stephen Carl, head equity trader at the Williams Capital Group.

Also bolstering equities and commodities was a Bloomberg report, which cited Sina.com, in saying the People's Bank of China would begin a 500 billion yuan standing lending-facility to the country's five largest banks.

"So basically you've got a stealth injection of liquidity by the People's Bank of China, and you've got a snap back in oil and copper," said Art Hogan, chief market strategist at Wunderlich Securities.

Humana gained after the managed-care company said it would repurchase as much as $2 billion of its shares. Wynn Resorts fell after Morgan Stanley projected reduced gambling in Macau.

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After climbing 135 points to an intraday record, the Dow Jones Industrial Average closed up 100.83 points, or 0.6 percent, at 17,131.97, with UnitedHealth Group pacing blue-chip gains that included 28 of 30 components.

Halting a two-session losing streak, the S&P 500 added 14.85 points, or 0.8 percent, to 1,998.98, with health care leading sector gains that included all 10 major industry groups.

A day after hits worst session since July 31, the Nasdaq advanced 33.86 points, or 0.8 percent, to 4,552.76.

The CBOE Volatility Index, a measure of investor uncertainty, fell 8.5 percent to 12.92.

For every share falling, nearly two rose on the New York Stock Exchange, where nearly 649 million shares traded. Composite volume exceeded 3.1 billion.

Trader on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Trader on the floor of the New York Stock Exchange.

On the New York Mercantile Exchange, commodities including oil and gold gained, with crude futures rising $1.96 to $94.88 a barrel, and gold futures up $1.60 at $1,236.70 an ounce.

The dollar declined against the currencies of major U.S. trading partners and the yield on the 10-year Treasury note used to figure mortgage rates and other consumer loans held at 2.59 percent.

Before the open, stock futures retained modest losses after data showed producer prices held flat in August, illustrating little-to-no inflation pressure that could otherwise push the Fed to hike rates sooner instead of later.

"No surprises there. That reading today is inconsequential. The commodity complex has pulled back significantly, so there is not an inflation pressure to make a move," said Hogan at Wunderlich Securities.

"There's a 50-50 chance that they change the language in their statement," said Hogan.

On Monday, stocks were mixed, with technology shares slammed ahead of Alibaba's planned debut later in the week, as investors unloaded high-fliers a day before the Federal Reserve starts a two-day policy session.

Read MoreWorst day for Nasdaq since July 31

—By CNBC's Kate Gibson

Coming Up This Week:

Wednesday

Earnings: FedEx, General Mills, Lennar, Cracker Barrel, Clarcor, Herman Miller

8:30 a.m.: CPI

8:30 a.m.: Current account

10:00 a.m.: NAHB survey

2:00 p.m.: FOMC statement

2:30 p.m.: Fed Chair Janet Yellen briefing

Thursday

Scotland independence vote

Earnings: Oracle, Rite-Aid, IHS, Tibco, RedHat

Alibaba IPO pricing

8:30 a.m.: Initial claims

8:30 a.m.: Housing starts

10:00 a.m.: Philadelphia Fed survey

Friday

10:00 a.m.: Leading indicators

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