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)."
The Greek jitters weighed globally, with Asian shares closing broadly in the red. European stocks recovered to close mostly higher while the Greek ATHEX Composite ended more than 4.5 percent lower.
"I've been on the side that markets never saw a commensurate drop to reflect the (tepid) growth that we've been seeing. All it takes is a situation like Greece... for people to take profits," said Nick Raich, CEO of The Earnings Scout.
Economic data releases continued to show moderate growth. May housing starts showed a 11.1 percent decline, missing expectations, while building permits increased 11.8 percent month-over-month.
The report followed Monday's National Association of Home Builders sentiment survey, which showed confidence rising to its highest level in nine months.
"The data has been a little mixed but positive," Ogg said.
United Airlines fell nearly 2 percent on Tuesday following news that it plans to end service in October at New York's John F. Kennedy International Airport, where it failed to profit for over seven years.
The health insurer closed up about 2 percent after a Monday report that it approached Aetna about a takeover deal. The smaller firm jumped nearly 3.3 percent to a new high.
The S&P 500 closed up 11.86 points, or 0.57 percent, at 2,096.29, with consumer staples leading all ten sectors higher.
The Nasdaq closed up 25.58 points, or 0.51 percent, at 5,055.55.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 15.
About two stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 648 million and a composite volume of nearly 2.9 billion in the close.
Crude oil futures settled up 45 cents, or 0.76 percent, at $59.97 a barrel on the New York Mercantile Exchange. Gold futures for August delivery settled down $4.90 at $1,180.90 an ounce.
On tap this week:
Earnings: Adobe Systems, Bob Evans, La-Z-Boy
FOMC begins two-day meeting
Earnings: FedEx, Actuant, Oracle, Clarcor, Jabil Circuit, Pier 1 Imports
2 p.m.: FOMC statement
2:30 p.m.: Fed Chair Janet Yellen press briefing
Earnings: Kroger, Rite Aid, Red Hat, Finisar, Smith & Wesson
8:30 a.m.: Initial claims
8:30 a.m.: CPI
8:30 a.m.: Current account Q1
10 a.m.: Philadelphia Fed survey
Earnings: CarMax, KB Home
11:40 a.m.: San Francisco Fed President John Williams on policy
12:45 p.m.: Cleveland Fed President Loretta Mester on community development and the Fed
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