Wall Street moved higher, paring some gains after rallying to record highs amid optimism about the US economic outlook and corporate profits, as investors eyed a meeting by the Federal Reserve which is set to tighten monetary policy.

The Federal Open Market Committee begins its next two-day meeting on Tuesday. It's expected to keep its key interest rate steady but begin unwinding its balance sheet. "QE certainly is over; QT is about to begin," Anthony Crescenzi, Pimco portfolio manager, told Bloomberg.

"That's quantitative tightening. It's illogical to think that quantitative easing would help markets but quantitative tightening won't hurt. It seems markets are taking the Fed's quantitative tightening in stride. It will be like Fed Chair Janet Yellen has said, like watching paint dry."

In 3.21pm trading in New York, the Dow Jones Industrial Average rose 0.3 per cent, while the Nasdaq Composite Index inched 0.03 per cent higher. In 3.06pm trading, the Standard & Poor's 500 Index advanced 0.1 per cent.

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Earlier in the day the Dow touched a record high 22,355.39, while the S&P 500 climbed to a record 2,508.32, and the Nasdaq reached a record 6,477.77.

US Treasuries declined, pushing yields on the 10-year note two basis points higher to 2.22 percent, the highest in more than a month, according to Bloomberg.

The Dow rose as advances in shares of General Electric and those of Caterpillar, recently up 2.2 per cent and 1.9 per cent respectively, outweighed declines in shares of Apple and those of Nike, recently down 1 per cent and 0.7 per cent respectively.

In fresh deal news, shares of Orbital ATK soared, up 20.1 per cent as of 2.09pm in New York after Northrop Grumman said it agreed to buy the missile and rocket maker for about US$7.8 billion in cash. Northrop's shares traded 2.8 per cent higher in New York.

Buying Orbital would make Northrop the fourth-largest Pentagon contractor, displacing Raytheon, according to Bloomberg.

"Clearly, as we watch what's happening around our globe, the rather rapid advance of some of our potential adversaries is quite concerning," Northrop Chief Executive Wes Bush said on a call with analysts, Reuters reported.

Shares of Nvidia continued their rally, touching a fresh record high, as analysts upgraded their outlooks for the company. Bank of America Merrill Lynch analyst Vivek Arya raised his price target on Monday by US$25 to US$210, the second highest on the Street behind Evercore ISI's US$250, according to Reuters.

In Europe the Stoxx 600 Index ended the session with an advance of 0.3 per cent from the previous close from the previous close. France's CAC 40 Index increased 0.3 per cent, Germany's DAX Index added 0.3 per cent, while the UK's FTSE 100 Index climbed 0.5 percent.

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