(AP) — Stocks closed modestly higher on Wall Street Tuesday as investors await Wednesday’s decision by the Federal Reserve on interest rates.

The S&P 500 rose 0.5%, the Dow Jones Industrial Average rose 0.2% and the Nasdaq rose 0.2%. The Fed is expected to raise its benchmark rate by twice the usual amount this week as it steps up its fight against inflation, which is at a four-decade high.

Banks and other financial stocks helped lift the market. Energy stocks gained ground following solid earnings reports from BP and Devon Energy.

Bond yields fell.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

NEW YORK (AP) — Stocks edged higher on Wall Street in afternoon trading Tuesday as investors await Wednesday’s decision by the Federal Reserve on interest rates.

The S&P 500 was up 0.4% as of 2:51 p.m. Eastern.

The Dow Jones Industrial Average rose 46 points, or 0.1%, to 33,107 and the Nasdaq inched up 0.1%. The indexes briefly dipped into the red earlier in the day, reflecting choppy trading.

Energy stocks made solid gains following encouraging earnings reports from several oil and gas companies. BP jumped 7.5% after reporting its highest quarterly profit in more than a decade thanks to surging oil and gas prices. Devon Energy rose 8.6% and Diamondback Energy gained 6.1% after they reported strong financial results.

Technology stocks held on to slight gains after a mixed morning. Many companies in the sector have pricey stock values and therefore have more force in pushing the major indexes up or down. Apple rose 0.6%.

The moderate gains follow a late-day rally on Monday that gave indexes a positive start to May after a brutal April.

“The rally in stocks yesterday and today is just positioning and squaring ahead of the Fed’s meeting tomorrow,” said Zach Hill, head of portfolio management at Horizon Investments.
Wall Street’s key focus over the next several days is the Fed. The central bank is meeting on Tuesday and will release a statement on Wednesday.

Investors expect it to raise its benchmark rate by twice the usual amount this week as it steps up its fight against inflation, which is at a four-decade high. It has already raised its key overnight rate once, the first such increase since 2018, and Wall Street is expecting several big increases over the coming months.

The Fed’s aggressive shift to raise interest rates comes as rising inflation puts more pressure on businesses and consumers. Higher costs for energy and other commodities have prompted many businesses to raise prices and issue cautious forecasts to their investors. Wall Street and economists are worried that higher prices on everything from food to gas and clothing will prompt a slowdown in consumer spending and crimp economic growth.

Bond yields eased. The yield on the 10-year Treasury fell to 2.96% from 2.99% late Monday. Treasury yields have been generally rising all year as investors prepare for higher interest rates, which will make borrowing money more expensive.

Investors have been closely reviewing the latest round of company earnings to get more details on how inflation is impacting business and consumer activity.

Household goods giant Clorox rose 2.2% after reporting solid quarterly profits, but it also cut its profit forecast for the year because of higher costs.

Starbucks will report its results later Tuesday. CVS Health will report its financial results on Wednesday.

Investors are getting some updates on the labor market, which was slow to recover from the pandemic initially, but has grown stronger. The Bureau of Labor Statistics reported on Tuesday that employers posted a record 11.5 million job openings in March, meaning the United States now has an unprecedented two job openings for every person who is unemployed.

On Friday, the Labor Department is expected to report that the economy generated another 396,000 new jobs in April, according FactSet. That would mark an unprecedented 12th straight month that hiring has come in at roughly 400,000 or more.