* Fed meeting in view, investors seek stimulus clarity
* CBOE Volatility index VIX up near 16
* Avago to buy LSI for $6.6 bln; AIG to sell unit for $5.4
* Indexes up: Dow 0.8 pct, S&P 0.5 pct, Nasdaq 0.6 pct
By Angela Moon
NEW YORK, Dec 16 (Reuters) - U.S. stocks gained on Monday,
rebounding from their worst week in months as large deals
boosted optimism but investors remained cautious ahead of an
upcoming Federal Reserve policy meeting.
Equities are coming off their biggest weekly decline in
nearly four months, a pullback that came on concerns the Fed may
begin to wind down the bond-buying stimulus at its two-day
policy-setting meeting that ends Wednesday.
The CBOE Volatility index VIX, Wall Street's
so-called fear gauge which usually moves inversely to the
performance of the S&P 500, was up 1.3 percent at 15.96.
"Implied volatilities increased across asset classes last
week as investors priced in a possible taper at this week's FOMC
meeting," said Mandy Xu, equity derivatives strategist at Credit
Suisse, adding that equity volatility gained the most.
The stimulus has been a major contributor to the market's
gains this year, and has been expected to keep a floor under
stock prices for as long as it continues.
Investors have been trying to gauge the timing of when the
central bank will start winding down its market-friendly bond
purchases, with many market participants expecting the Fed to
announce a tapering in March.
However, stronger economic data of late, including the
November payroll report, led some to believe the tapering could
come as soon as at the Fed's meeting this week. The Fed has said
it will slow the program when certain economic indicators meet
its growth targets.
"Traders should expect lots of volatility and uncertainty as
this announcement approaches," said Randy Frederick, managing
director of active trading and derivatives at the Schwab Center
for Financial Research.
"There is little consensus whether good news is good or bad
right now, with the indicators that I watch showing everything
from fully bearish to fully bullish."
In M&A news, Avago Technologies Ltd agreed to buy
LSI Corp for $6.6 billion, while American International
Group Inc said it would sell its aircraft-leasing
business to AerCap Holdings NV in a deal valued at about
Shares of Avago jumped 9 percent to $49.72 while LSI surged
39 percent to $10.96. AerCap surged 36 percent to $33.98 and AIG
rose 1.2 percent to $50.32.
The Dow Jones industrial average rose 118.54 points
or 0.75 percent, to 15,873.9, the S&P 500 gained 9.53
points or 0.54 percent, to 1,784.85 and the Nasdaq Composite
added 23.815 points or 0.6 percent, to 4,024.79.
The S&P 500 fell below its 14-day moving average on
Wednesday and has not risen above it since, a sign of weak
near-term momentum. However, the benchmark index is less than 2
percent below its record closing high, indicating that recent
selling has not been panic-driven.
Twitter Inc briefly hit a new all-time high of
$60.20 but was down 2.2 percent to $57.73 near midday trade.
Procter & Gamble plans to reorganize its overseas
business as part of Chief Executive A.G. Lafley's plans to cut
costs, according to a Bloomberg report that cited three
unidentified people briefed on the matter.
In economic data, U.S. manufacturing output rose for a
fourth straight month in November as production increased almost
across the board, in the latest suggestion the economy is