* August retail sales in line with expectations
* Fed to meet on Wednesday and Thursday
* Fiat Chrysler up as talks with union continues
* Indexes up: Dow 0.36 pct, S&P 0.30 pct, Nasdaq 0.20 pct (Updates to open)
By Tanya Agrawal
Sept 15 (Reuters) - U.S. stocks rose on Tuesday after data showed retail sales continued to climb in August but investors remained cautious ahead of this week's Federal Reserve meeting.
U.S. consumer spending appeared to grow at a healthy pace halfway through the third quarter, pointing to solid domestic demand that could persuade the Fed to raise interest rates.
Analysts said an interest rate hike would remove the uncertainty that has dogged the market for several weeks.
After the retail data, traders raised their bets the Fed would raise rates later this week to 27 percent from 23 percent on Monday, according to CME Group's FedWatch program.
"Uncertainty about the Fed's likely decision continues. If there is no rate hike on Thursday, it could also give a signal that the Fed has some concerns about the health of the economy," said Christian Stocker, strategist at UniCredit in Munich.
At 9:55 a.m. ET (1355 GMT) the Dow Jones industrial average was up 59.06 points, or 0.36 percent, at 16,430.02, the S&P 500 was up 5.85 points, or 0.3 percent, at 1,958.88 and the Nasdaq Composite was up 9.66 points, or 0.2 percent, at 4,815.43.
Seven of the 10 major S&P sectors were up, with the energy index's 0.71 percent gain leading the advancers. Brent crude edged further above $46 a barrel, supported by the prospect of lower U.S. inventories and production. Chevron's 1.9 percent rise gave the biggest boost to the Dow.
Gains were capped by other data that showed U.S. manufacturing continuing to struggle. Factory activity in New York state contracted in September for a second straight month.
Chinese stocks also dropped almost 4 percent on Tuesday, denting hopes that a slew of stimulus measures by Beijing over the past three months had brought some stability to the market.
The Fed has said it will raise rates for the first time since 2006 once it sees a sustained economic recovery with emphasis on the labor market and inflation.
Shares of Fiat Chrysler Automobiles were up 2.7 percent at $14.72 after the United Auto Workers union said it will keep talking with the automaker to reach a new contract for the company's U.S. factory workers, delaying a possible strike at its most profitable operations.
Go Pro was up 2.5 percent at $33.72 after Northland Capital Markets said the wearable camera maker's growing sports content and video ecosystem made it a compelling acquisition target for Apple and other companies seeking original content.
Advancing issues outnumbered decliners on the NYSE by 1,583 to 1,087. On the Nasdaq, 1,447 issues rose and 856 fell.
The S&P 500 index showed one new 52-week high and two new lows, while the Nasdaq recorded 13 new highs and 26 new lows. (Reporting by Tanya Agrawal; Editing by Don Sebastian)