U.S. stocks closed higher on Tuesday as the Federal Reserve's began a two-day meeting and investors attempted to shake off worries about the Greece debt talks. ( Tweet This )
"Looking at the bigger perspective, we've been in this narrow range for almost four months," said David Lefkowitz, senior equity strategist at UBS Wealth Management. "Greece matters but I also think the market is trying to understand what the Fed's next steps are."
Investors are looking for signals on the pace of rate increases, in addition to the timing of the initial hike.
The Dow Jones industrial average gained more than 100 points, recovering from two days of declines. The bounce followed European stocks higher after a negative open.
"I think it's a little short covering. I think we're stuck in a tight range here and waiting for more information (on the Fed and Greece)," said David O'Malley, CEO of Penn Mutual Asset Management.
The Federal Open Market Committee kicked off its meeting on Tuesday. The real news of interest on monetary policy comes out Wednesday afternoon, when the Fed releases its statement and Yellen holds a press briefing. Consensus is for a rate hike in September.
"Right now what's taken center stage is the Fed today and tomorrow," said Jeff Kravetz, regional investment strategist at U.S. Bank Wealth Management. "We may not get anything new out of the Fed. Nothing has materially changed on the Fed."
Art Cashin, director of floor operations at UBS, noted a bias for gains on the first day of the Fed meeting, as well as traders setting up positions in anticipation of a bounce when Fed Chair Janet Yellen speaks Wednesday afternoon.
Treasury yields traded lower, off multi-month highs touched last week. The U.S. 10-year Treasury yield was 2.31 percent, while the 2-year yield fell below 0.70 percent. The 10-year German bund yield traded around 0.80 percent.
The U.S. dollar gained against major world currencies, with the euro holding above $1.12.
Concerns about Greece abated slightly after weighing heavily on investor sentiment on Monday and index futures Tuesday morning. The major averages shook off mild declines to attempt gains in morning trade, with the Dow Jones industrial average recovering to trade in the black for the year after closing in negative territory on Monday.
"If the biggest driver is concern over Greece, that's probably overplayed and we're getting a little of Greece fatigue and a technical bounce," said Art Hogan, chief market strategist at Wunderlich Securities.
Greek Prime Minister Alexis Tsipras on Monday blamed creditors for the collapse of talks on unlocking aid for reforms this past weekend. The impasse has raised concerns that Athens is heading for a debt default that could end with it leaving the euro zone.
Tsipras told lawmakers of his Syriza party on Tuesday they will continue to work for a solution but their public mandate is to end austerity, while Greek officials want a deal that ends talk of "Grexit" once and for all. A spokesman said in a Reuters report that Athens has submitted proposals and is waiting for a response from lenders.
"We consider participation in the euro area to be irreversible and it is on this assumption that the regulations and the treaty have been written," European Central Bank executive board member Yves Mersch told the European Parliament, Reuters said.
The European Central Bank holds a policy meeting on Wednesday when it could announce a change to Emergency Liquidity Assistance to Greece.
Euro zone finance ministers are next due to discuss the Greek crisis on Thursday—when Tsipras has a planned visit to Russia.
"Greece is the most proximate thing everybody's got their eye on besides the (Fed) meeting," said Maris Ogg, president of Tower Bridge Advisors. "I don't think it's big enough to worry about. ... I think the real question is, does Greece stay in the euro? I think, yeah, they're going to kick the can (down the road)."