Wall Street's main indexes have closed higher after seesawing during the session as investors wait to see how aggressively the Federal Reserve will hike interest rate hikes at this week's policy meeting.
Even more so than the Ukraine war or corporate earnings, the actions of the US central bank are driving market sentiment as traders try to position themselves for a rising interest rate environment.
The S&P 500 and the Nasdaq logged their worst weekly percentage drop since June on Friday as markets fully priced in at least a 75 basis point rise in rates at the end of Fed's September 20-21 policy meeting, with Fed funds futures showing a 15 per cent chance of a whopping 100 bps increase.
Unexpectedly hot August inflation data last week also raised bets on increased rate hikes down the road, with the terminal rate for US fed funds now at 4.46 per cent.
"This is all about what's going to happen on Wednesday, and what comes out of the Fed's hands on Wednesday, so I think people are just going to wait and see until then," said Josh Markman, partner at Bel Air Investment Advisors.
"We had a poor print when the CPI came in, so the Fed - who is behind the 8-ball - is now trying to get ahead of the curve and curb inflation, and that (awareness) is driving equity markets."
Focus will also be on new economic projections, due to be published alongside the Fed's policy statement at 2pm ET on Wednesday.
Worries of Fed tightening have weighed heavy on the S&P 500 this year, with a recent dire earnings report from delivery firm FedEx Corp, an inverted US Treasury yield curve and warnings from the World Bank and the IMF about an impending global economic slowdown adding to the woes.
Goldman Sachs cut its forecast for 2023 US GDP late on Friday as it projects a more aggressive Fed and sees that pushing the jobless rate higher than it previously expected.
"The Fed will continue to plough along, we'll get 75 (bps) on Wednesday, but what comes next and whether they are going to pause or not after Wednesday, that is going to be the interesting part," said Bel Air's Markman.
The S&P 500 gained 27.08 points, or 0.70 per cent, to end at 3,900.00 points, while the Nasdaq Composite gained 86.78 points, or 0.76 per cent, to 11,535.18 and the Dow Jones Industrial Average rose 200.30 points, or 0.65 per cent, to 31,022.72.
A majority of the 11 S&P 500 sectors rose.
One exception was healthcare, which was dragged down by a fall in shares of vaccine maker Moderna Inc a day after US President Joe Biden said in a CBS interview that "the pandemic is over".
Industrial stocks rebounded after a sharp drop on Friday, while banks also gained.
Tech heavyweights Apple Inc and Tesla Inc rose to provide the biggest boost to the S&P 500 and the Nasdaq.
Take-Two Interactive Software Inc closed up, having recovered from a slump earlier in the day caused by confirmation that a hacker had leaked the early footage of Grand Theft Auto VI, the next installment of the best-selling video game.
Meanwhile, Knowbe4 Inc jumped after the cybersecurity firm said that Vista Equity Partners had offered to take it private for $US24 per share, valuing the company at $US4.22 billion ($A6.27 billion).