This Week: Housing starts, Fed meeting, CarMax earnings

If the Fed gives a nod to rising inflation or focuses its trimmed-down bond buying on longer-dated bonds as it winds down its balance sheet, there could be a shift around of preferred sectors, investors said.

The members are also likely to keep its key benchmark interest rate steady, as investors see that inflationary pressures are not enough to push the bank for another hike in December.

The meeting is not expected to result in an interest rate increase, but investors will focus on how Fed Chair Janet Yellen characterises recent inflation readings, for clues to the likelihood of an increase in December, as well as on how the US central bank will begin to wind down its $4.5 trillion balance sheet.

Markets are now pricing in a more than 50 percent chance of a Fed hike by the end of the year, up from only around a 40 percent chance less than a week ago, according to CME FedWatch, having brought forward their bets after a strong U.S. inflation print last week.

While inflation has perked back up a bit, largely because of higher oil prices, it's still below the Fed's 2% target. The European Central Bank is meanwhile expected to shed more light on plans to exit its extraordinary stimulus next month.

At 10:59 a.m. ET (1459 GMT), the Dow Jones Industrial Average was up 71.16 points, or 0.32 percent, at 22,339.5, the S&P 500 was up 5.83 points, or 0.233179 percent, at 2,506.06 and the Nasdaq Composite was up 20.94 points, or 0.32 percent, at 6,469.41.

U.S. Treasury releases worldwide money flows data for July.

Advancing issues outnumbered decliners on the NYSE by 1,723 to 996. The real step change may come next year, when changes in committee composition and the potential replacement of Janet Yellen as chair could mean that more hawks are in a position to impose their views.

Last week, Canada's competition watchdog said it would not challenge a proposed merger between the two companies.

The double-whammy of Irma and Harvey could shave as much as 0.5 percent off of US GDP in the third quarter, as businesses are disrupted, energy prices rise and hiring weakens.

In Asia on Monday Hong Kong ended up 1.3 percent, Shanghai closed 0.3 percent higher and Sydney rallied 0.5 percent. India's Sensex gained 0.6 percent to 32,472.62. But economic growth and low unemployment of 4.4 percent are saying it should.

Federal Reserve Chairwoman Janet Yellen has some explaining to do: Inflation remains quite tame despite very low unemployment and stocks keep hitting fresh records even though the USA economy is still just plodding forward.

Treasury yields tend to fall on soft inflation data and rise on stronger inflation data because inflation chips away at the fixed returns of government debt and can lead the Fed to raise interest rates.

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