NEW YORK (AP) -- Stocks eked out modest gains after a choppy day of trading Tuesday as Wall Street waits to find out how aggressively the Federal Reserve will raise interest rates at its latest policy meeting on Wednesday.
The S&P 500 ended 0.5% higher after briefly slipping into the red earlier in the day. The Dow Jones Industrial Average rose 0.5% and the Nasdaq inched up 0.2%.
Banks and other financial stocks helped lift the market. Energy stocks also made solid gains following encouraging quarterly earnings reports from several oil and gas companies. Retailers and other companies that rely on direct consumer spending lagged the broader market.
Bond yields were mixed. The yield on the 10-year Treasury fell to 2.97% 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.
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.
"Right now, the market wants to hear that the Fed is going to be ahead of inflation," said Megan Horneman, chief investment officer at Verdence Capital Advisors. "What would spook the market is if there's any hint of dovishness in their tone."
The S&P 500 rose 20.10 points to 4,175.48. The Dow gained 67.29 points to 33,128.79. The Nasdaq rose 27.74 points to 12,563.76.
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 1%.
Smaller company stocks outpaced the broader market. The Russell 2000 added 15.94 points, or 0.9%, to 1,898.86.
The market's 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.
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 3% 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.
BP jumped 8% after reporting its highest quarterly profit in more than a decade thanks to surging oil and gas prices. Devon Energy rose 10.2% and Diamondback Energy gained 6.8% after they reported strong financial results.
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.