The Fed begins its two-day meeting tomorrow, and the market widely expects a rate reduction the following day. Central bankers lowered rates by a half-point in September for the first time in four years after the credit markets seized up and posed the threat of recession. The economy has a hard time growing if companies can't borrow and lend money.

But with energy prices soaring to new records, the risk of inflation — which tends to accelerate when rates are low — may give policy makers some pause. Crude oil futures soared above $93 a barrel for the first time on the New York Mercantile Exchange today after a storm led Mexico's state oil company to suspend about a fifth of its oil production.

The Fed remains concerned about inflation but is likely to lower the target federal funds rate by a quarter-point due to overriding credit worries, said Scott Wren, equity strategist for A.G. Edwards & Sons.

"It's kind of a psychological sort of move," Wren said. "A 25 basis-point cut isn't going to ease the credit crunch. But it'll give the Fed a little more time to figure out what's going on with the economy."

According to preliminary calculations, the Dow Jones industrial average rose 63.56, or 0.46 percent, to 13,870.26.

Broader stock indicators also gained. The Standard & Poor's 500 index rose 5.70, or 0.37 percent, to 1,540.98, while the Nasdaq composite index rose 13.25, or 0.47 percent, at 2,817.44.

Treasury bond prices rose modestly as bond investors grew more cautious in their rate expectations. The yield on the 10-year Treasury note, which moves inversely to the price, slipped to 4.38 percent, from 4.41 percent late Friday.

The dollar was mixed against rival currencies, while gold prices rose.

Light, sweet crude for December rose $1.67 to settle at a record $93.53 a barrel on the New York Mercantile Exchange after rising as high as $93.80.

In addition to the hope for a rate cut, an earnings report from electronics retailer RadioShack Corp. encouraged Wall Street that companies are still seeing rising profits despite the slowing economy. RadioShack, after swinging to a third-quarter profit thanks to reduced expenses and improved inventory, rose 80 cents, or 4.1 percent, to $20.42.

Worries about Office Depot Inc.'s results, however, caused the retailer's shares to drop $2.86, or 14.1 percent, to $17.43. Three analysts downgraded the stock after the company said it will postpone its third-quarter earnings report.

Earnings so far have generally shown weakness in the financial and housing sectors but strength in others.

"It's a stock-pickers' kind of market. If you're in the right sectors, you're going to do well, but if you're in the broader market, you've got exposure to those weak sectors," said Rob Lutts, president and chief investment officer of Cabot Money Management.

Nearly 300 companies in the S&P 500 reported earnings by last Friday, on average posted a third-quarter profit decline of 4.9 percent, said Nick Raich, director of equity research for National City's private client group. The figure was wider than the consensus, but primarily because of the dismal results at companies with exposure to housing and the credit markets. Eight of the S&P 500's 10 sectors reported average earnings gains of 8 percent or more, and five of those sectors posted double-digit gains.

And though record-high crude prices and rising metal prices hurt consumers, they helped boost the stocks of companies who sell those commodities. ExxonMobil Corp. and Alcoa Inc. were among the biggest gainers in the Dow.

Alcoa rose $1.08, or 2.7 percent, to $40.43.

ExxonMobil rose $1.40 to $93.61.

In other corporate news, investors awaited the fate of Merrill Lynch & Co.'s chief executive Stan O'Neal, who was reportedly close to resigning amid broad criticism for leading the company to its biggest quarterly loss in its 93-year history. Merrill shares rose $1.33, or 2 percent, to $67.42.

Trading was relatively light today. Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange, where volume came to 1.22 billion shares.

The Russell 2000 index of smaller companies rose 0.33, or 0.04 percent, to 821.72.