* CPI tops expectations, helping lift financial stocks
* Iraq violence remains in focus; oil dips
* Fed begins two-day policy meeting; few changes expected
* Dow up 0.2 pct; S&P 500 up 0.2 pct; Nasdaq up 0.5 pct
(Updates to mid-afternoon)
By Ryan Vlastelica
NEW YORK, June 17 U.S. stocks rose modestly on
Tuesday afternoon, recovering from morning declines though
investors kept watching the turmoil in Iraq as the Federal
Reserve began a two-day policy meeting.
Iraq's Shi'ite rulers defied Western calls to reach out to
Sunnis to defuse an uprising in the north of the country,
declaring a boycott of Iraq's main Sunni political bloc and
accusing Sunni power Saudi Arabia of promoting "genocide."
Investors have been monitoring the situation in Iraq,
worried that it could lead to sharply higher oil prices for an
extended period. U.S. crude prices slipped 0.5 percent to
$106.31 per barrel, following a jump of more than 4 percent last
"The Iraq situation could continue to destabilize markets,
and there are a lot of unknown factors that could keep oil
prices elevated. That said, valuations for stocks are not
alarmingly high, and there aren't many alternatives for
investors," said Bernard Baumohl, a managing director at the
Economic Outlook Group in Princeton, New Jersey.
The latest economic data showed that housing starts and
building permits fell more than expected in May, though the
overall Consumer Price Index rose 0.4 percent, the biggest gain
in more than a year.
The spike in the CPI prompted investors to sell some U.S.
government debt, pushing the yield on the 10-year Treasury note
up as high as 2.65 percent and helping to drive the
S&P financial stocks index up 0.9 percent. It was the
S&P's best-performing sector. E*Trade Financial was the
S&P 500's top gainer, rising 7.4 percent to $21.95. Shares of
Charles Schwab Corp advanced 5.4 percent to $27.27.
The Dow Jones industrial average rose 28.71 points or
0.17 percent, to 16,809.72. The S&P 500 gained 4.53
points or 0.23 percent, to 1,942.31. The Nasdaq Composite
added 21.71 points or 0.5 percent, to 4,342.81.
The Fed began its two-day policy meeting at 10 a.m. (1400
GMT) as scheduled and is widely expected to conclude with
another $10 billion cut of its monthly bond purchases. Not much
else is expected in the way of concrete policy moves, putting
the focus on whether officials will tip their hand on
longer-term plans for interest rates.
"This meeting will be one of the most difficult for the FOMC
since there is a particularly difficult set of variables to
consider, both domestically and geopolitically," Baumohl said.
"It will be very challenging to come up with a policy, given all
the uncertainties out there."
Yingli Green Energy shares soared 10.5 percent to
$3.89 after the Chinese solar panel maker reported a quarterly
net loss that was nearly halved, citing cost controls and a
small rise in panel prices.
(Editing by Jan Paschal)