US STOCKS-Wall Street gains on rate-cut hopes

(Updates to midday)

By Kristina Cooke

NEW YORK Oct 29 (Reuters) - U.S. stocks rose on Monday as investors bet the Federal Reserve will cut interest rates at the end of a two-day policy meeting that begins on Tuesday.

Shares of Exxon Mobil (XOM.N) and other energy companies led the Dow higher after U.S. crude futures CLc1 set a record. But for the broader market, oil prices above $93 a barrel fueled concerns that consumer and business spending may take a hit.

The S&P has gained about 2 percent over the past week on speculation the Fed will cut its benchmark fed funds rate by 0.25 percentage point to 4.5 percent as insurance against the risk that shocks from declining house prices and higher borrowing costs could tip the economy into recession. The Fed's decision is expected on Wednesday afternoon.

"We're holding up well, given the higher oil prices and the weaker dollar. The market is pricing in a cut to take the pressure off the housing market," said Peter Sorrentino, senior portfolio manager at Huntington Asset Management in Cincinnati. "But in our view, if the Fed cuts rates now, it may create more problems down the road."

He added that he liked the earnings picture for energy, technology and industrial stocks.

The Dow Jones industrial average .DJI was up 42.75 points, or 0.31 percent, at 13,849.45. The Standard & Poor's 500 Index .SPX was up 3.67 points, or 0.24 percent, at 1,538.95. The Nasdaq Composite Index .IXIC was up 6.54 points, or 0.23 percent, at 2,810.73.

In earnings news, consumer electronics chain RadioShack (RSH.N) said it swung to a quarterly profit from a loss a year ago. RadioShack's shares rose 5.8 percent to $20.75 on the New York Stock Exchange.

Dell Inc's (DELL.O) shares rose 2.6 percent to $29.72 and ranked among the Nasdaq's biggest advancers after Goldman Sachs added the computer maker's stock to its "conviction buy" list.

But the S&P financial sector index .GSPF was down 0.5 percent. Thrifts and mortgage lenders were the worst-performing sub-sector in the S&P 500. Adding to the gloomy forecast for the sector, Swiss bank UBS AG (UBSN.VX) warned it may face more write-downs on its fixed-income portfolio, joining other major banks that have been bruised in the mortgage market crisis.

Exxon shares were up nearly 2 percent at $93.91 on the NYSE. Chevron (CVX.N) stock gained 1.6 percent to $93.11.

Shares of Merrill Lynch & Co Inc MER.N were little changed at $65.99 as investors awaited word on the fate of the investment bank's chairman and chief executive, Stan O'Neal. News reports have said Merrill's board was likely to force O'Neal's departure, possibly as early as Monday. For details, see [ID:nN28643244]. Merrill's stock had surged on Friday on reports hinting at his departure. (Additional reporting by Jennifer Coogan)