* U.S. shares climb, Fed statement due Wednesday
* Dollar up against the yen for second day
* Brent crude rises to hover around $106
By Leah Schnurr
NEW YORK, June 18 U.S. equities pushed higher on
Tuesday as investors grew more confident that the Federal
Reserve would temper its recent statements on the future
reduction of U.S. monetary support, while still pointing to
The dollar was down 0.3 percent against a basket of
currencies, but rose for a second day against the yen.
The Federal Reserve meeting, which started Tuesday, has
taken on greater significance since Fed Chairman Ben Bernanke
said in May stimulus plans could be scaled back if the U.S.
economy gains momentum. The Fed will issue its policy statement
on Wednesday, followed by a news conference by Bernanke.
Last month's comments threw a wrench in the stock market's
rally, caused U.S. benchmark bond yields to rise and hurt the
dollar. The Fed is currently buying $85 billion in bonds monthly
to keep borrowing costs low and boost demand.
Wall Street was about 1 percent higher by mid-afternoon, led
by growth shares that would be expected to do well in an
expanding economy. European shares ended flat. U.S. bond prices
were marginally higher, with the benchmark 10-year Treasury
yield trading at 2.17 percent.
The expectation is that the Fed will dial back its rhetoric
on tapering to ease "hysteria" in the markets since talk of
reducing stimulus heated up in May, said Peter Kenny, chief
market strategist at Knight Capital in Jersey City, New Jersey.
"The volatility is absolutely 100 percent tied to the
confluence of themes, the two themes being quantitative easing
on the one hand, and improving economic data on the other hand,
which supports the removing of quantitative easing," said Kenny.
"The volatility is right where those two currents meet."
Data on Tuesday showed U.S. consumer prices rose in May and
a gauge of underlying price pressures showed signs of
stabilization after a long decline. That could be encouraging to
Fed policymakers who would like to see stronger inflation.
The Dow Jones industrial average gained 156.89
points, or 1.03 percent, to 15,336.74. The Standard & Poor's 500
Index rose 14.48 points, or 0.88 percent, to 1,653.52.
The Nasdaq Composite Index climbed 34.00 points, or 0.98
percent, to 3,486.13.
The benchmark S&P 500 has surged 15 percent since the start
of 2013, but the rally in stocks is expected to decelerate in
the latter part of the year, putting equities only modestly
beyond their record highs, a Reuters poll found.
European shares ended down 0.1 percent. Stocks
found some support in a rise in investor sentiment in Germany
that suggested Europe's largest economy is on the slow road to
recovery. But it was only a brief distraction ahead of the Fed.
A measure of global stock markets was up 0.5
The dollar gained against the Japanese yen, rising 0.8
percent to 95.22 yen. The euro rose 0.3 percent to
$1.3406, boosted by improved German investor sentiment.
"Even if they're considering tapering moving forward,
tapering isn't tightening. They're still going to be easing,
they're still going to be expanding their balance sheet. They
wouldn't be tightening until they start to shrink the balance
sheet," said Eric Viloria, currency strategist at Forex.com in
Treasuries were choppy, with bond investors focused on the
Fed. Benchmark 10-year Treasuries were last up 2/32 in price to
yield 2.17 percent. Thirty-year bonds cut early
declines to add 13/32 in price to yield 3.33 percent.
The U.S. economic data helped boost Brent crude above $106 a
barrel as it eased some concerns over what the Fed may signal.
Brent was up 64 cents to $106.11, while U.S. oil
was up 74 cents at $98.51.
"If the Fed takes away the stimulus, it will boost the
dollar and potentially push oil prices down, but a lot has been
priced in already," said Simon Wardell, analyst at Global
"The Fed will try to do it as gradually as possible to avoid
a shock so the impact on oil will probably be minimal."