* China's imports shrink for 10th straight month
* Apple biggest boost to the S&P, Nasdaq
* Fitbit rises after broker upgrade
* Indexes up: Dow 1.90 pct, S&P 1.80 pct, Nasdaq 2.04 pct (Updates to early afternoon)
By Tanya Agrawal
Sept 8 (Reuters) - U.S. stocks were higher in early afternoon trading on Tuesday as investors returned from a holiday weekend after a late rally by Chinese shares lifted global markets.
Chinese stocks rose nearly 3 percent on Tuesday as a surge in late-afternoon buying helped erase early losses. China said late on Monday it would remove tax on dividend incomes for investors who hold stocks for more than a year in an effort to encourage longer-term investment.
Data on Tuesday showed that China's imports shrank far more than expected in August, falling for the 10th straight month, bolstering hopes of more stimulus measures from the Chinese government.
"Today's rally is a bit of a catch-up after we saw global markets do well on Sunday night and Monday morning," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
"Investors are also being forced back into equities because even after the recent swings, there aren't any other options that will give the type of returns that equities does."
At 12:37 ET (1637 GMT), the Dow Jones industrial average was up 305.79 points, or 1.9 percent, at 16,408.17, the S&P 500 was up 34.58 points, or 1.8 percent, at 1,955.8 and the Nasdaq Composite was up 95.75 points, or 2.04 percent, at 4,779.67.
All the 10 major S&P sectors were higher with the industrials index's 2.2 percent and technology 2.1 percent rise leading the advancers.
Apple shares were up 2.2 percent at $111.69, a day before the iPhone maker is expected to unveil new offerings. The stock gave the biggest boost to the S&P and the Nasdaq.
Global financial markets have been rattled in recent weeks by fears that China's slowdown could drag on already sluggish global growth, prompting some investors to bet that the U.S. central bank will delay a hike until the end of the year.
Wall Street capped a tough week on Friday, with major indexes closing down more than 1 percent, after a mixed August jobs report did little to quell uncertainty about whether the Federal Reserve will increase interest rates at its Sept.16-17 meeting.
Following Friday's employment data, futures market traders predicted about a 20 percent chance a rate hike will come this month, down from around 30 percent before the jobs report.
Nonfarm payrolls increased by 173,000 last month, fewer than the 220,000 that economists polled by Reuters had expected. But the unemployment rate dropped to 5.1 percent, its lowest in more than seven years, and wages accelerated.
The Fed, which hasn't raised rates since 2006, has insisted it will hike long-term interest rates only when the recovery in the U.S. economy is sustainable, placing special emphasis on the labor market and inflation.
While the job market and unemployment rate has met Fed targets, inflation is stubbornly stuck below the central bank's 2 percent target.
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota is expected to speak at an event later in the day in Evanston, Illinois.
Fitbit was up 8.5 percent at $34.56 after Morgan Stanley upgraded the stock to "overweight".
Media General fell 1.7 percent to $10.96 after it said it would buy diversified media company Meredith Corp for about $2.34 billion to create the third-largest local TV station owner in the United States. Meredith was up 9.3 percent at $50.21.
Advancing issues outnumbered decliners on the NYSE by 2,458 to 516. On the Nasdaq, 2,227 issues rose and 564 fell.
The S&P 500 index showed one new 52-week high and no new lows, while the Nasdaq recorded 38 new highs and 14 new lows. (Editing by Don Sebastian)