US stocks closed firmly in the green on Tuesday as a key inflation report showed prices largely holding steady ahead of the Federal Reserve's final 2023 policy meeting.

The Dow Jones Industrial Average (^DJI) closed up about 0.5%, or more than 150 points — its third-highest close ever.

The S&P 500 (^GSPC) also finished the day up around 0.5%, notching its best close since Jan. 14, 2022. Contracts on the tech-heavy Nasdaq Composite (^IXIC) led the day, up roughly 0.6%, after all three major gauges closed Monday at their highest levels since early 2022.

The Consumer Price Index (CPI) showed prices ticked up slightly at 0.1% over last month and 3.1% over the prior year in November, as Yahoo Finance's Alexandra Canal reported.

Investors are widely expecting a pause to rate hikes at the end of the central bank's two-day meeting, which starts Tuesday. But traders are easing back on their bets on a rate cut in March, according to CME FedWatch data.

Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards

While consumer inflation is expected to remain flat for the second straight month, the "core" reading — which excludes food and energy prices — could prove stickier. That would likely prompt investors to rethink when the Fed might start lowering rates.

Following the report, US bond yields retreated slightly, with 10-year Treasury yields (^TNX) down roughly 3 basis points to trade near 4.21%.

In individual stocks, Oracle (ORCL) shares closed down more than 12% after the software giant's second quarter sales fell short of estimates.

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