US open: Equities edge higher as FOMC decision looms large

Shortly before 1500 BST, the Dow Jones Industrial Average was up 39 points to 16,410.05, while the S&P 500 and the Nasdaq gained three and six points respectively.

The Federal Open Market Committee kicks off its two-day meeting on Wednesday and, while analysts remained divided over the outcome, it could result in the first hike in interest rates for almost a decade.

“We expect the hiking cycle to be even slower than the Fed currently anticipates, at least in its early phase -which may take several years- with subdued wage pressures,” said Philip Marey, senior US strategist at Rabobank.

“In fact, the fragility of the US economic recovery may even lead to temporary reversals of rate hikes down the road as any major shock can slow down this economy to a standstill or worse.”

Empire State Index remains in the red

US retail sales rose less than expected, as the Federal Reserve looks for signs of economic improvement ahead of its interest rate decision this week.

The Commerce Department said sales increased 0.2% in August, compared to analysts' expectations for a 0.3% rise and the previous month's 0.6% gain.

"The August retail sales report suggests that the bout of late-month financial turmoil, which impacted consumer confidence a little, did not have any meaningful adverse impact on consumption," said Steve Murphy, US economist at Capital Economics.

Elsewhere, business conditions in the New York region remained weak in September, the New York Federal Reserve said on Tuesday.

The Empire State manufacturing index for September rose slightly to -14.7 from -14.9 in August, which was the lowest level on record since 2009.

September’s reading fell well short of the -0.15 reading analysts had expected.

"Given the relatively small size of the manufacturing base in New York state, we place limited weight on this morning’s release," analysts at Barclays said on Tuesday.

"We look to Thursday’s release of the Philadelphia Fed manufacturing index, often a better indicator of national trends, for further indication of the state of the US manufacturing sector at the end of the third quarter."

Asian stocks declined, with China’s Shanghai Composite Index losing 3.52% as volatility returned to the region, while European equities were also in the red.

The dollar was broadly flat against the euro, rose 0.21% against the pound and declined 0.41% against the yen, while gold futures declined 0.09% to $1,106.70.

Oil prices staged a steady rebound after declining on Monday, with West Texas Intermediate gaining 0.47% to $44.21 a barrel, while Brent crude rose 0.36% to $46.54 a barrel.

In company news, snack and breakfast foods giant Kellogg shed 0.09% after saying it would buy a 50% stake in African distribution company Multipro for $450m.

United Natural Foods will report fourth-quarter earnings after the closing bell.