While you were sleeping: Stocks rally as Wall St braces for rate rise

UPDATED Wall Street closed on its highs after notes from the US Federal Reserve's last policy meeting showed officials said it "could well be" time to raise short-term interest rates for the first time in almost a decade.

"I am now reasonably satisfied the situation has settled down ... so I am comfortable with moving off zero soon, conditioned on no marked deterioration in economic conditions," Atlanta Fed president Lockhart told a conference of bankers, traders and regulators, Reuters reported.

"I believe it will soon be appropriate to begin a new policy phase," noted Lockhart, who has a vote at the December meeting.

At the close, the Dow Jones Industrial Average was up 247.66 points, or 1.4%, to 17,737.16. The Standard & Poor's 500 Index rose 1.6% to 2083.58 while the Nasdaq Composite Index increased 1.8% to 5075.20.

Shares of Apple rose after Goldman Sachs added the company to its "conviction buy" list, predicting the stock will climb to $US163 in the next 12 months.

"We expect that over the next year, the focus will shift from unit growth (which is slowing given a maturing smartphone market) to installed base monetisation and recurring revenues ("Apple-as-a-Service"), Goldman analyst Simona Jankowski and her team wrote in a note, Bloomberg reported.

"Apple's model has already tilted that way with its new iPhone 6s installment plans, and we see the upcoming TV service as a powerful next step."

Shares of Norfolk Southern gained 6.4% at $US92.49 after Canadian Pacific Railway outlined to its rival a proposal to combine the two railroads.

Shares of ConAgra Foods rose 4% to $US40.93 after the maker of Peter Pan peanut putter said it would split itself into two companies.

In earnings news, Target shares lost 4.3% to $US69.78 after the retailer reported a quarterly sales gain but slower growth going into the key holiday shopping season.

The latest data on the US housing market were mixed but failed to alter the view that the sector is improving.

A Commerce Department report showed US housing starts fell 11% to a 1.06 million annualised rate in October, the slowest since March, down from a revised 1.19 million rate in September.

Even so, building permits gained 4.1% to a 1.15 million annualised rate.

"Overall, fundamentals for the sector remain solid," Connecticut-based RBS chief economist Michelle Girard told Reuters. "Household formation is rising, demand for new homes is outstripping supply, and home builder confidence remains near its highest level in a decade."

Crude oil futures in New York settled up 0.2% at $US40.75 a barrel after dropping below $US40 during the session.

In Europe, the Stoxx 600 Index ended the day with a 0.1% decline from the previous close.

Germany's DAX Index also slipped 0.1%, while France's CAC 40 Index fell 0.6%. The UK's FTSE 100 Index added 0.2%.

Updated for Wall Street close at 10am NZ time.

(BusinessDesk)