U.S. stocks rose on Monday ahead of Wednesday's Federal Reserve meeting where policy makers are expected to make an a cut in interest rates.
The Dow Jones Industrial Average was up 63.56, or 0.5 perctn, to 13870.26. The S&P 500 rose 5.70, or 0.4 percent, to 1540.98. The Nasdaq Composite Index advanced 13.25, or 0.5 percent, to 2817.44.
The Federal Reserve is widely seen as moving to cut its benchmark overnight lending rate for banks and financial institutions from 4.75 percent to at least 4.50 percent. The outlook for a cut comes amid continuing signs of trouble in the housing markets and company earnings reports showing billions in losses due to tight credit markets and an ongoing housing downturn.
Shares of Merrill Lynch rose $1.33, or 2.01 percent to $67.42 as the firm's embattled CEO Stan O'Neal was negotiating the terms of his exit from the company, according to published reports.
O'Neal, who has been at the helm of the world's largest brokerage since 2002, underestimated losses in the latest quarter from the current credit crisis and angered his board of directors for unilaterally proposing merger talks with competing bank Wachovia.
New York traded shares of UBS AG fell $0.58 cents, or 1.08 percent during the regular trading session after it reported further likely write-downs in the fourth quarter related to subprime mortgage lending problems.
If the Fed cuts rates more than expected dollar investors may decide the U.S. economy is on shaky grounds, shifting their investments to stocks which are likely to rise on a large cut as the policy makers move to make the money supply cheaper.
Oil companies benefited from record crude prices amid production cuts in Mexico and the potential for expanded military strife between Turkey and Kurdish rebels in Northern Iraq.
Shares of Exxon Mobil gained 1.52 percent, Chevron rose 1.34 percent, BP was up 0.79 percent, Conoco Phillips advanced 0.27 percent, and Royal Dutch Shell ended up 0.56 percent.
Other gainers included Verizon Communications, up 0.9 percent. Human dropped 2.4 percent. Office Depot fell 14.1 percent after it delayed it earnings report. Radio Shack was up 4.1 percent swinging to a profit.