Stocks Climb Ahead of Fed Meeting

U.S. stocks climbed for a second straight day Tuesday, with the tech-focused Nasdaq Composite ending near a five-week high, as jitters over bank instability eased. Investors are now preparing for the conclusion of the Federal Reserve's interest-rate-setting meeting Wednesday, when a quarter-percentage-point increase appears likely.

Regional banks and other financial companies accounted for much of the gains, following news reports that JP Morgan Chase (JPM) CEO Jamie Dimon is leading discussions to stabilize embattled lender First Republic Bank (FRC), boosting the latter's shares about 45%.

The Fed remained front of mind. Markets are pricing in a 75% to 80% chance of a 25-basis-point interest rate increase at the conclusion of the central bank's Federal Open Market Committee (FOMC) meeting Wednesday. However, considering the potentially still-fragile state of the financial sector, "there's a chance the Fed might decide not to raise rates," says Collin Martin, a director of fixed income strategy at the Schwab Center for Financial Research.

Of greater interest, Collin adds, will be Fed Chair Jerome Powell's post-meeting remarks as well as the Fed's "dot plot," a chart reflecting each Fed official's rate projections for the coming months and years.