US STOCKS-Wall St rebounds after steep weekly decline; Fed in focus

* Fed meeting in view, investors seek stimulus clarity

* Avago to buy LSI (Munich: LOG.MU - news) for $6.6 bln; AIG to sell unit for $5.4

bln

* S&P 500 near all-time high, but below 14-day moving

average

* Indexes up: Dow 0.9 pct, S&P 0.7 pct, Nasdaq 0.8 pct

By Angela Moon

NEW YORK, Dec 16 (Reuters) - U.S. stocks rose 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 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.

"I still believe January or March are more likely, but the

round of profit taking seen from Dec. 10 through Dec. 12 point

to growing concerns. 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."

Among a number of 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 $5.4 billion.

Shares of Avago jumped 6.8 percent to $48.76 while LSI

surged 39 percent to $10.96. AerCap surged 36 percent to $33.98

and AIG rose 2.3 percent to $50.86.

The Dow Jones industrial average rose 138.94 points

or 0.88 percent, to 15,894.3, the S&P 500 gained 12.6

points or 0.71 percent, to 1,787.92 and the Nasdaq Composite

added 30.141 points or 0.75 percent, to 4,031.116.

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 (NYSE: TWTR - news) briefly hit a new all-time high of

$60.20 in early morning trading, but has since fallen 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.

The New York Federal Reserve said on Monday its "Empire (Stockholm: EMP-B.ST - news)

State" manufacturing activity index rose in December to 0.98

from -2.21 in November. Economists in a Reuters survey had

expected a reading of 4.75.