Stock market today: Dow poised to build on record as stocks rise ahead of Fed decision
09/17/2024 20:48
Investors are looking to retail sales data for clues to consumer health, the last piece of data that could factor into the Fed's rate decision.
Stocks rose on Tuesday, with techs leading the advance as investors assessed fresh retail sales data in the wait for a Federal Reserve meeting pivotal to an interest-rate cut.
The Dow Jones Industrial Average (^DJI) moved up roughly 0.2%, coming off a record-high close for the blue-chip index. The S&P 500 (^GSPC) added about 0.4%, while the tech-heavy Nasdaq Composite (^IXIC) put on 0.7%.
Stocks are setting up for gains as the odds on a 0.5% Fed rate cut creep higher, with just one day to go before officials reveal their monetary policy decision. The central bank's two-day meeting, which begins Tuesday, is prevailingly expected to bring the first easing in rates since early 2020.
Investors were weighing data that showed retail sales surpassed Wall Street's estimates in August, with the focus on signs of a slowdown in consumer spending. The reading is the last piece of data that could factor into the Fed's thinking on opting for a substantial rate cut rather than a quarter-point move.
Read more: Fed predictions for 2024: What experts say about the possibility of a rate cut
Right now, the rate-path debate is focused on the possibility that the bigger cut could prompt panic in markets. At the same time, some on Wall Street suggest the smaller move could also disappoint and spark concern.
As of Tuesday, traders see odds of 65% on a 50 basis point reduction in rates, compared with 62% a day ago. The chances of a 25 basis point cut stand at 35%, per the CME FedWatch tool.
Meanwhile, Intel's (INTC) shares popped after its foundry secured Amazon as a multibillion-dollar customer for AI chips. Also helping revive faith in battered tech stocks was Microsoft's (MSFT) new plan to buy back up to $60 billion in shares and a 10% boost to its dividend.
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Retail sales top Wall Street estimates in August
Retail sales surpassed Wall Street's estimates in August, as investors keep a close eye on any signs of a slowdown in consumer spending. The data comes as the Federal Reserve's two day policy meeting kicks off in Washington with the central bank widely expected to cut interest rates as economic growth data slows and inflation lessens.
Retail sales rose 0.1% in August. Economists had expected a 0.2% decrease in spending, according to Bloomberg data. Meanwhile, retail sales in July were revised to a 1.1% increase, from a prior reading that showed sales increased by 1% in the month, according to Census Bureau data.
"The stronger than expected retail sales data for August suggest that, boosted by rapid wealth gains and falling energy prices, consumers continue to spend freely despite the labour market slowdown," Capital Economics North America economist Olivia Cross wrote in a note to clients on Tuesday.
The release comes as investors widely expect the Fed will cut interest rates for the first time since 2020 when it's next policy decision is announced at 2 p.m. ET on Wednesday.
"I don't think this changes really anything," BofA Securities senior US economist Stephen Juneau told Yahoo Finance. "It's kind of a nonevent."
On Tuesday morning markets were pricing in a 67% chance the Fed cuts interest rates by 50 basis points, compared to the 33% odds seen that the Fed opts for a smaller 25 basis point cut, per the CME FedWatch Tool.
Stocks open higher ahead of key Fed decision
Stocks rose on Tuesday, with techs leading the advance as investors assessed fresh retail sales data in the wait for a Federal Reserve meeting pivotal to an interest-rate cut.
The Dow Jones Industrial Average (^DJI) moved up roughly 0.2%, coming off a record-high close for the blue-chip index. The S&P 500 (^GSPC) added about 0.4%, while the tech-heavy Nasdaq Composite (^IXIC) put on 0.7%.