(Reuters) - Wall Street inched higher on Tuesday as strong consumer spending data gave the latest sign of improvement in economic growth and supported the Federal Reserve's stance to increase interest rates in the coming months.
[caption id="attachment_142104" align="alignright" width="300"] Traders work on the floor of the New York Stock Exchange in New York City. (PHOTO: Brendan McDermid/Reuters)[/caption]
Hopes of a rate hike boosted financial companies, while a rise in oil prices pushed energy stocks higher.
Data showed U.S. consumer spending surged 1 percent in April, its biggest increase in more than six years and beating economists' expectation of a 0.7 percent rise.
The personal consumption expenditures price index, excluding the volatile food and energy components, rose 0.2 percent last month.
In the 12 months through April, the core PCE rose 1.6 percent after a similar increase in March. The core PCE is the Fed's preferred inflation measure and is running below the U.S. central bank's 2 percent target.
Fed Chair Janet Yellen said on Friday a rate hike in the coming months would likely be appropriate, pointing to an improvement in the economy and a strong labor market.
Yellen's comments, which came after months of uncertainty on the Fed's stance on rates swayed the markets, and the strong data on Tuesday come ahead of the comprehensive U.S. jobs data at the end of this week.
"I think most people are looking toward the end of the week with the employment report likely to have a big influence of what the Fed may do in the months ahead," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
Brown said the markets have been taking comments on rate hikes relatively well.
"In December, the markets held up pretty well when the Fed raised rates, it wasn't until the early part of this year when we got a reaction," he said.
St. Louis Fed president James Bullard said on Monday that global markets appear to be "well-prepared" for a summer rate hike, although he did not specify a date for the policy move. The Fed next meets on June 14 and 15.
At 8:46 a.m., the Dow Jones industrial average was up 2.8 points, or 0.02 percent, at 17,876.02
The S&P 500 was up 1.67 points, or 0.08 percent, at 2,100.73 and the Nasdaq Compositewas up 8.15 points, or 0.17 percent, at 4,941.65.
The benchmark S&P 500 index has risen about 1.6 percent in May through Friday's close and is set to record its third straight month of gains.
Eight of the 10 major S&P sectors were higher, with the energy index's 0.36 percent rise leading the advancers.
Allergan rose 2 percent after Carl Icahn revealed a "large position" in the drugmaker. The stock gave the biggest boost to the S&P 500.
A report from the Conference Board on consumer confidence is expected to show the index at 96.0 in May, up from a reading of 94.2 in April.
Celator Pharma jumped 71 percent to $29.99 after agreeing to be bought by Jazz Pharma for about $1.5 billion. Jazz Pharma was down 0.3 percent at $151.55.
Cliffs Natural Resources surged 36.8 percent to $4.20 after JP Morgan upgraded the stock and the iron ore producer signed a supply agreement with ArcelorMittal.
Advancing issues outnumbered decliners on the NYSE by 1,669 to 1,042. On the Nasdaq, 1,437 issues rose and 976 fell.
The S&P 500 index showed 22 new 52-week highs and no new lows, while the Nasdaq recorded 46 new highs and three new lows.