U.S. stocks rebound ahead of Fed update

U.S. stocks moved higher in afternoon trading Tuesday, rebounding after two days of losses.

Investors monitored the latest batch of corporate deals, as well as new data on home construction, while waiting for a policy update from the Federal Reserve on Wednesday.

The Dow Jones industrial average rose 113 points, or 0.6 percent, to 17,905 at 3:01 p.m. ET. The Standard & Poor's 500 index added 12 points, or 0.6 percent, to 2,096. The Nasdaq composite gained 30 points, or 0.6 percent, at 5,060.

Traders are looking ahead to Wednesday, when Federal Reserve policymakers will wind up a two-day meeting and deliver a policy update. Investors are trying to gauge when the Fed will begin raising its key interest rate after holding it close to zero for more than six years. Many economists anticipate the Fed could make its move as soon as September.

"Today is really about a waiting game and about getting comfortable with your risk," said JJ Kinahan, TD Ameritrade's chief strategist. "On thin (trading) days we often tend to drift higher."

All 10 of the sectors in the S&P 500 moved higher, with consumer staples leading the gainers.

Shares in Aetna rose 3 percent after The Wall Street Journal reported that UnitedHealth Group approached the rival health insurer about a deal. Aetna added $3.68 to $124.69. UnitedHealth gained $2.52, or 2.1 percent, to $121.50.

Perrigo climbed as traders assessed that it may be acquired by a rival. Mylan, a maker of generic drugs, has said it wants to buy the company, but is itself a target for another bid from Teva Pharmaceuticals.

On Tuesday, Abbott Laboratories, Mylan's biggest shareholder, said that it backed Mylan's plan to remain a stand-alone company. Teva has made a $40 billion takeover offer for Mylan, but wants that company to drop the Perrigo bid.

Perrigo gained $7.69, or 4.2 percent, to $190.99.

Coty surged 18.1 percent on news reports that the cosmetics and fragrance company has won an auction to buy several Procter & Gamble businesses. Coty gained $4.73 to $30.78.

Oshkosh shares slumped 8.3 percent after the specialty truck and vehicle maker cut its full-year profit forecast, citing bad weather and delayed product launches. The stock lost $4.18 to $46.12.

Homebuilder stocks fell broadly after the Commerce Department reported that builders broke ground on fewer homes in May. AV Homes fell the most, losing 27 cents, or 1.6 percent, to $16.57.

European stocks were mixed as jitters mounted over whether Greece and its creditors can reach a bailout agreement that will keep the country from defaulting on its debts. France's CAC 40 rose 0.5 percent, while Germany's DAX added 0.5 percent. Britain's FTSE 100 was flat. Greece's main stock index sank 4.8 percent.

Japan's Nikkei 225 dipped 0.6 percent and South Korea's Kospi lost 0.7 percent. Hong Kong's Hang Seng fell 1.1 percent. Other Asian benchmarks, including Taiwan and Singapore, were also lower.

Benchmark U.S. crude oil edged up 35 cents to $59.87 a barrel on the New York Mercantile Exchange. The contract hit a high for the year last Wednesday.

Gold dropped $4.90 to $1,180 an ounce. Silver fell 11.8 cents to $15.97 an ounce. Copper slipped 3 cents to $2.62 a pound.

Bond prices rose. The yield on the 10-year Treasury note edged down to 2.32 percent from 2.36 percent late Monday.