September 17, 2013 / 5:02 PM / 4 years ago

US STOCKS-Wall St up on bets Fed tapering will be modest

3 Min Read

* Federal Reserve begins two-day policy meeting

* Investors expect modest tapering from the Fed: analysts

* Microsoft shares up on dividend announcement, Apple rebounds

* Indexes up: Dow 0.3 pct, S&P 0.4 pct, Nasdaq 0.6 pct

By Rodrigo Campos

NEW YORK, Sept 17 (Reuters) - U.S. stocks rose on Tuesday on expectations the Federal Reserve will make only modest changes to a monetary policy that has been highly supportive of stocks and other assets.

The policy-setting Federal Open Market Committee was to begin its two-day meeting on Tuesday to discuss whether to scale back its monthly bond purchases, or quantitative easing. Many investors expect Fed chairman Ben Bernanke will announce a scale-back of purchases by $10 billion a month to $75 billion, while keeping rates close to zero.

"The Fed is going to be very gradual in any tapering process as the most aggressive estimates are $10 or $15 billion will come out" of the current monthly purchases, said Art Hogan, managing director at Lazard Capital Markets in New York.

He said the market is also underpinned because an imminent confrontation was averted in Syria and global economic data continues to improve.

A statement with the FOMC's decision will be released on Wednesday afternoon, followed by a Bernanke news conference.

Hogan said if the Fed statement comes in within consensus, "the market may be inclined to sell off."

The Dow Jones industrial average rose 41.7 points or 0.27 percent, to 15,536.48, the S&P 500 gained 5.87 points or 0.35 percent, to 1,703.47 and the Nasdaq Composite added 21.737 points or 0.58 percent, to 3,739.583.

U.S. consumer prices barely rose in August, but gains in rents and medical care costs pointed to a stabilization in underlying inflation that could allow the Fed to trim stimulus.

Adding to investor confidence, crude prices continued to fall as a deal averting a U.S.-led attack on Syria calmed fears of a Middle East oil supply disruption.

Brent fell 2.3 percent for a 4.7 percent decline in the past two days, trading below $108 a barrel. U.S. crude was down 1.4 percent on the day, just over $105 a barrel.

Apple shares, which Monday closed below their 200-day moving average for the first time since August 12, rose 1.8 percent to $458.23.

Pandora Media Inc shares reversed course and were up 2.8 percent at $24.66 a day after the company warned that its business growth is slowing and proposed a follow-on offering of 10 million shares.

Microsoft shares rose 0.6 percent to $33.01 after the company said it would raise its quarterly dividend by 22 percent.

Shares of Aeropostale Inc jumped 19 percent to $10.25 after Sycamore Partners reported a 7.96 percent holding in the teen apparel retailer.

Safeway shares jumped 8.2 percent to $30.35 after hitting $31.11, its highest in more than five years, after the company adopted a stockholder rights plan.

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