(Reuters) - The S&P 500 and the Dow rose on Monday afternoon, lifted by financial stocks, a day before the Federal Reserve holds a meeting to discuss interest rates.
The Fed is expected to leave rates unchanged at the two-day meeting, but investors will assess Chair Janet Yellen's speech on Wednesday for clues on the timing of the next rate hike.
"There is an overriding sense that the Fed is going to move in December," said Robert Pavlik, chief market strategist at Boston Private Wealth.
The probability of a December move shot up to 70 percent in the past month from 57.5 percent in the previous month, according to a Reuters poll of over 100 economists.
The S&P 500 financial index rose 1.18 percent, giving the biggest boost to the benchmark. The index is coming off its worst two-week decline since the Brexit vote in June, partly due to some Fed officials striking a dovish stance on rates.
"The weakness seen last week (in financials) is attracting attention today," Pavlik said.
JPMorgan, Bank of America and Wells Fargo rose between 1.2 percent and 1.7 percent and were the top influences on the S&P. The KBW Bank index registered its biggest percentage gain in nearly three weeks.
The real estate index, which debuted on Monday, rose 1.27 percent and topped 10 of the 11 major S&P sectors.
Investors will also keep an eye on the Bank of Japan's policy meeting on Tuesday and Wednesday, where it is largely expected to not announce further policy easing.
At 12:20 a.m. ET, the Dow Jones industrial average was up 38.55 points, or 0.21 percent, at 18,162.35.
The S&P 500 was up 3.98 points, or 0.19 percent, at 2,143.14.
The Nasdaq Composite was down 0.80 points, or 0.02 percent, at 5,243.76, dragged lower by a 1 percent fall in Apple.
The dollar index declined 0.3 percent, sending gold prices higher, on dim prospects of a rate increase this week.
Traders priced in a 15 percent chance of a rate hike by Wednesday, while the odds jumped to 56.5 percent for December, according to the CME Group's FedWatch tool.
Sarepta Therapeutics' shares rocketed 86.7 percent to $52.43 after the FDA approved its key muscle disorder drug.
Casino operator Isle of Capri jumped 30.2 percent after Eldorado Resorts said it would buy the company for $1.7 billion, including debt. Eldorado's shares fell 2.2 percent.
General Motors rose 2.9 percent after Morgan Stanley upgraded the stock to "overweight".
Advancing issues outnumbered decliners on the NYSE by 2,248 to 683. On the Nasdaq, 1,829 issues rose and 908 fell.
The S&P 500 index showed 10 new 52-week highs and two new lows, while the Nasdaq recorded 87 new highs and 21 new lows.
(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Saumyadeb Chakrabarty)