Wall St. inches up on views Fed will hold off on rates

By Caroline Valetkevitch

(Reuters) - U.S. stocks edged higher on Tuesday as economic data bolstered views the Federal Reserve may decide against raising interest rates in the near term.

The S&P financial index, which tends to rise with expectations for higher rates, slipped 0.4 percent, while the S&P utilities index rose 0.9 percent.

A weaker-than-expected reading on the U.S. services sector in August added to views the Fed will refrain from raising interest rates when it meets next week.

The Fed is "not getting support from data for a rate increase, and so we're seeing the market creep a little higher today," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

Stocks should benefit from a continued environment of low rates and the Fed on the sidelines as long as economic data doesn't show significant slowing, he said.

The chances of a rate hike in September dropped to 15 percent, from 21 percent, after the data. Odds for a December rate hike fell to 46.9 percent from 50.6 percent, according to CME Group's FedWatch tool.

The Dow Jones industrial average was up 28.71 points, or 0.16 percent, to 18,520.67, the S&P 500 had gained 3.69 points, or 0.17 percent, to 2,183.67 and the Nasdaq Composite had added 19.01 points, or 0.36 percent, to 5,268.91.

The S&P 500's energy index rose 1.5 percent, driven by Enbridge's acquisition of Spectra Energy for about $28 billion. Spectra jumped 14.7 percent.

Navistar jumped 44.5 percent after Volkswagen agreed to supply engines to the U.S. truck maker in exchange for a 16.6 percent stake.

Advancing issues outnumbered declining ones on the NYSE by a 1.26-to-1 ratio; on Nasdaq, a 1.13-to-1 ratio favored advancers.

The S&P 500 posted 36 new 52-week highs and no new lows; the Nasdaq Composite recorded 157 new highs and 16 new lows.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D'Silva and Nick Zieminski)