* August consumer price index falls unexpectedly
* Fed begins two-day meeting, statement due Thursday afternoon
* Oil prices jump 5.7 percent
* Indexes up: Dow 0.71 pct, S&P 0.75 pct, Nasdaq 0.44 pct (Updates to late afternoon, adds commentary)
By Sinead Carew
Sept 16 (Reuters) - Energy stocks lifted Wall Street on Wednesday following an almost 6-percent jump in oil prices, while investors braced for the Federal Reserve’s decision on interest rates.
The Fed is due to announce a decision on Thursday afternoon to either end or extend seven years of near-zero interest rates, potentially relieving markets of months of uncertainty as investors have been trying to predict the timing for a hike.
The market’s move up did not appear to be because of any real conviction about what the Fed will decide, said Tom Donino, co-head of trading at FNY Capital Management in New York.
“It’s either shorts covering, because they don’t want to be short tomorrow ahead of the Fed meeting, or it’s people that want to be long getting long in front of the Fed,” said Donino. “The market’s going to be volatile tomorrow.”
Wall Street’s top economists are on unfamiliar ground: as the Federal Reserve decides whether to raise interest rates for the first time in years, they are deeply divided on what will happen.
Fed fund futures <0#FF:> see only a 30-percent chance that Janet Yellen and her colleagues will pull the trigger this week. Of the 80 economists polled by Reuters, only 35 said the central bank is likely to raise rates this week.
At 3:07 p.m., the Dow Jones industrial average rose 118.49 points, or 0.71 percent, to 16,718.34, the S&P 500 gained 14.87 points, or 0.75 percent, to 1,992.96 and the Nasdaq Composite added 21.17 points, or 0.44 percent, to 4,881.69.
Eight out of ten major S&P sectors were higher. The energy index led the charge with a 2-percent rise as crude oil prices settled up 5.7 percent after an unexpected drawdown in U.S. stockpiles. Chevron’s 1.6-percent rise provided one of the biggest boosts to the Dow.
The materials sector was the next best gainer with a 1.1 percent rise after Glencore PLC raised $2.5 billion through a share placement, boosting mining stocks and metals prices.
“That put a little bit of backbone behind people who want to start buying these mining stocks here,” said FNY’s Donino.
Stocks have been volatile since China devalued its currency in August. The S&P 500 has had moves of at least 1 percent in 12 of the past 18 sessions.
The CBOE Volatility index - popularly known as the “fear index” - was above 22 after closing there for the 17th consecutive day on Tuesday, its longest run at that level in nearly four years.
Data on Wednesday showed that U.S. consumer prices unexpectedly fell in August as gasoline prices resumed their decline and a strong dollar curbed the cost of other goods.
NYSE advancing issues outnumbered decliners 2,305 to 731, for a 3.15-to-1 ratio; on the Nasdaq, 1,709 issues rose and 1,068 fell for a 1.60-to-1 ratio favoring advancers.
The S&P 500 posted 8 new 52-week highs and 1 low; the Nasdaq recorded 34 new highs and 28 lows. (Additional reporting by Tanya Agrawal; Editing by Don Sebastian and Nick Zieminski)