Wall St, US dollar up overnight

Trader Dermott Clancy, centre, works on the floor of the New York Stock Exchange. File photo / AP

Wall Street and the greenback rose overnight, while US Treasuries declined, after a report showing solid retail sales a day before the Federal Open Market Committee starts a two-day meeting that might conclude with the first rate rise in almost a decade.

A Commerce Department report showed US retail sales climbed 0.2 percent in August, after an upwardly revised 0.7 percent increase in July.

"Given that the retail sales number was good, there's still hope in terms of the market pricing that the Fed could go on Thursday," Mark McCormick, a foreign-exchange strategist at Credit Agricole in New York, told Bloomberg.

In New York trading at about 3:30pm, the Dow Jones industrial average added 1.6 percent, the Standard & Poor's 500 Index rose 1.5 percent, while the Nasdaq Composite Index increased 1.4 percent.

US Treasuries fell, pushing yields on the 10-year note nine basis points higher to 2.27 percent, while yields on two-year note rose as much as seven basis points to 0.80 percent, the highest since April 2011, according to Bloomberg.

Gains in shares of Merck and those of Microsoft, last up 2.79 percent and 2.75 percent respectively, led the advance in the Dow. Chevron and other energy stocks moved higher with the price of oil. Chevron last traded 2.1 percent higher.

Investors, analysts and economists alike are divided about whether the Fed will lift rates this week, underpinned by concern about China's struggle to stoke economic growth and its stock market rout. China's Shanghai Composite index extended its slump on Tuesday, closing 3.6 percent lower.

The head of China's largest brokerage, Citic Securities, is now being investigated as part of the government's widening effort to bolster confidence in shares.

"The debate around the Fed continues but the Fed will do more damage waiting for December to raise rather than start the normalisation process," Art Hogan, chief market strategist at Wunderlich Securities, told Reuters. "If they don't raise rates this week, it's a bad signal."

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Separate Fed reports showed manufacturing output slid 0.5 percent in August, following a 0.9 percent increase in July, while factory activity in New York state shrank in September for a second straight month.

"Looking at the data alone, Fed officials will probably say, yes, the conditions are right to tighten," Jeremy Lawson, chief economist at Standard Life Investments in Edinburgh, told Reuters. "If it were not for the increase in financial stress, they would be tightening this month."

In Europe, the Stoxx 600 Index finished the day with a 0.8 percent gain from the previous close. Germany's DAX Index added 0.6 percent, the UK's FTSE 100 Index rose 0.9 percent, while France's CAC 40 Index climbed 1.1 percent.