* Fed seen announcing plans to unwind debt portfolio
* Sprint, T-Mobile shares jump after report of merger talks
* Best Buy down after disappointing adjusted earnings forecast
* Indexes up: Dow 0.19 pct, S&P 0.10 pct, Nasdaq 0.07 pct (Updates to late afternoon, adds commentary, changes byline)
By Sinead Carew
Sept 19 (Reuters) - U.S. stocks were slightly higher on Tuesday, helped by gains in financial, technology and telecom stocks, but indexes traded in a narrow range as investors stayed away from making major bets ahead of the Federal Reserve's policy meeting.
The U.S. central bank, which begins its two-day meeting on Tuesday, is widely expected to announce on Wednesday that it will begin paring its bond holdings, with reductions likely to start in the coming months.
While a September interest rate increase is not expected, investors will closely watch Fed Chair Janet Yellen's views on inflation, as they look for clues on whether or not the Fed will raise rates in December.
"There's one school of thought that rates will go up because there's some inflation coming from a very tight labor market and storms that will create very tight demand," said Rick Meckler president of LibertyView Capital Management in Jersey City, New Jersey, regarding Tuesday's boost to bank stocks, which benefit from higher rates.
Six of the 11 major S&P sectors were higher, with the financial sector's 1-percent gain providing the biggest boost and the biggest percentage gain was the telecom services sector's roughly 2 percent jump due to mergers and acquisitions speculation. Technology rose 0.5 percent.
"In a market that gets fairly fully priced, you tend to get more sector rotation," Meckler said.
At 2:59 p.m. ET, the Dow Jones Industrial Average rose 41.46 points, or 0.19 percent, to 22,372.81, the S&P 500 gained 2.52 points, or 0.10 percent, to 2,506.39 and the Nasdaq Composite added 4.49 points, or 0.07 percent, to 6,459.13.
"People are in wait-and-see mode. The expectations are that rates will remain unchanged and they (the Fed) will start balance sheet unwinding. But there's always a possibility of surprise. I think that's why investors are cautious," said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.
The biggest U.S. telephone operators, Verizon and AT&T rose more than 2 percent, helping to lift the S&P. Shares of smaller wireless carrier T-Mobile rose 5.3 percent and Sprint jumped 8.1 percent, following a report they were in active merger talks.
The healthcare index was one of the biggest laggards amid declines in insurers such as United Health , which fell 1.9 percent due to the latest efforts in Washington to overhaul Obamacare.
Best Buy fell 7.4 percent after the No.1 U.S. electronics retailer forecast 2021 adjusted earnings well below Wall Street estimates. The stock was one of the biggest drags on the consumer discretionary index.
Tesla fell 2.4 percent after Jefferies started coverage of the electric car maker's stock with "underperform".
Advancing issues outnumbered declining ones on the NYSE by a 1.07-to-1 ratio; on Nasdaq, a 1.04-to-1 ratio favored advancers. (Additional reporting by Sruthi Shankar in Bengaluru, Caroline Valetkevitch in New York; Editing by Arun Koyyur and Nick Zieminski)