NEW YORK (TheStreet) -- If investors were resigned to a September rate hike, Tuesday's economic data might have tipped the scale in favor of a delay.

Weaker U.S. industrial data, softer retail sales, and dismal business conditions in the New York region kept the hope alive that the Federal Reserve could delay its first rate hike in nearly a decade at its two-day meeting this week. 

The possibility of a delay fueled a stock market rally on Tuesday. The S&P 500 was up 1.3%, the Dow Jones Industrial Average gained 1.4%, or 230 points, and the Nasdaq added 1.1%.

Fed members will convene for a two-day meeting on Wednesday in which they could decide to hike rates for the first time since 2006. On one side of the argument, economists said recent domestic economic strength warrants liftoff from crises-level rates. On the other, some argued that recent global market turmoil should give the Fed pause in tinkering with monetary policy.

Industrial production in the U.S. fell 0.4% in August, as economists had expected. The decline in industrial production was driven by reduced output from automakers. Auto production fell 6.4%, the fastest drop in three years. Industrial production in July was revised up to growth of 0.9% from a previous reading of 0.6%.

Business conditions in the New York region remained weak in September, according to the Empire State Manufacturing Survey. The index narrowed to negative 14.7 from negative 14.9 in August, clawing back from its lowest level since 2009.

U.S. business inventories rose just 0.1% in July, the smallest increase since March. Inventories in June were downwardly revised to 0.7% growth from a previous 0.8% reading. The July increase was as expected, though suggested businesses were dialing back on inventory which could have a negative knock-on effect on manufacturing.

U.S. retail sales rose at a slower-than-expected pace in August, up 0.2% from a 0.7% jump in July. Consumers spent less on gasoline over the month and more on cars and trucks. Excluding auto sales and gasoline, sales rose 0.4%. Economists had expected the headline number to climb 0.3%.

"For the Fed, this will be seen as an encouraging sign that underlying growth momentum remains quite firm," said Millan Mulraine, deputy chief U.S. macro strategist at TD Securities. "Nevertheless, it will be some time before they get a full accounting on the impact on domestic economic activity from the global growth concerns and strong dollar."

Crude oil prices bounced on Tuesday after closing Monday at a low of more than two weeks. West Texas Intermediate crude on Tuesday rose 1.5% to $44.66 a barrel. Prices have been under pressure as China showed signs of a slowdown and global production remained at record highs.

The energy sector was the best performer on markets. Among the major oilers, Exxon Mobil (XOM - Get Report) , PetroChina (PTR - Get Report) , Royal Dutch Shell (RDS.A - Get Report) , Total (TOT - Get Report) and Chevron (CVX - Get Report) were all higher. The Energy Select Sector SPDR ETF (XLE - Get Report) added 1.1%.

Cheniere Energy (LNG - Get Report) shares were active after activist investor Carl Icahn increased his stake in the company to 9.59%, up from 8.18% in August. Icahn now owns more than 22 million shares in the company and believes the company is "undervalued" despite the fact it hasn't earned a profit in more than 20 years.

Wal-Mart (WMT - Get Report) is set to expand its grocery pickup service to a number of new locations as part of its push to test out new offerings at its smaller-scale Neighborhood Markets stores. The additional locations are step one of a larger expansion, the company said on Tuesday.

General Electric (GE - Get Report) blamed Washington lawmakers in Congress for forcing the company to relocate 500 jobs overseas. The industrial company said Congress had opposed government-run loan agency U.S. Export Import Bank and that the expiration of the bank had forced GE's hand. Ex-Im had provided loans or guarantees to American companies that sold pricey goods such as jets and expensive mechanical parts.

Twitter (TWTR - Get Report) may be without a permanent CEO for a little longer. A recent board meeting indicates an announcement may not be made until October or November, according to Re/code. Former CEO Dick Costolo stepped down on June 11 and co-founder Jack Dorsey has since temporarily assumed the position.

Alcoa (AA - Get Report) shares were 2.3% higher after Ford (F - Get Report) said it would start using advanced Alcoa aluminum alloy for parts of its F-150 pickup. The companies have also agreed to collaborate on using "Micromill" process aluminum in other Ford models.