US STOCKS-Wall St rises, eyes turn to Fed meeting

* 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 1 pct, S&P 0.8 pct, Nasdaq 0.7 pct

By Ryan Vlastelica

NEW YORK, Dec 16 (Reuters) - U.S. stocks rose on Monday as large deals boosted optimism after a steep decline last week, though investors remained heavily focused on an upcoming Federal Reserve policy meeting.

Equities are coming off their worst week in nearly four months, a pullback that came on concerns the Fed may begin a stimulus wind-down 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.

"The market's direction has been biased towards the upside, and there's some relief from last week's selling pressure," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

"I was expecting hesitation going into the Fed, but I think most accept that while it is possible we'll see some kind of change in policy, it is unlikely."

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 10 percent to $50.09 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 was up 154.90 points, or 0.98 percent, at 15,910.26. The Standard & Poor's 500 Index was up 14.08 points, or 0.79 percent, at 1,789.40. The Nasdaq Composite Index was up 29.51 points, or 0.74 percent, at 4,030.49.

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) fell 0.9 percent to $58.43 after both Wells Fargo (Hamburg: NWT.HM - news) and SunTrust downgraded the social media stock.

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.

Overseas, European shares rose 0.9 percent after Markit's Flash Eurozone Composite Purchasing Managers' Index ended 2013 at its highest level of the year.