Wall St rises ahead of key Fed decision; S&P 500 nears record high

By Johann M Cherian and Purvi Agarwal

(Reuters) – Wall Street’s main indexes rose on Tuesday, with the benchmark close to its intraday record high, as investors awaited a crucial Federal Reserve policy decision and fresh economic data allayed worries of a sharp slowdown in the U.S. economy.

A Commerce Department report showed retail sales rose unexpectedly in August, as a decline in receipts at auto dealerships was offset by strength in online purchases, suggesting the economy was on solid footing through much of the third quarter.

Rate-sensitive growth stocks such as Alphabet (NASDAQ:) and Tesla (O:) added 1.0% and 1.90%, while Nvidia (NASDAQ:) edged up 0.44%, pushing the broader chips index higher 0.60%.

Microsoft (NASDAQ:) boosted the S&P 500 with a 2.3% rise on the day after the AI-frontrunner’s board approved a new $60-billion share buyback program and hiked its quarterly dividend by 10%. The broader tech sector climbed 0.70%.

At 09:49 a.m. ET, the rose 78.70 points, or 0.19%, to 41,706.55, the S&P 500 gained 21.50 points, or 0.38%, to 5,654.59 and the gained 126.91 points, or 0.72%, to 17,719.03.

The blue-chip Dow traded at a record high and the index tracking small caps – which tend to perform better in a low-interest-rate environment – advanced 0.71%.

Seven of the 11 S&P 500 sectors traded higher, led by a 1% rise in Consumer Discretionary stocks.

With Fed officials scheduled to commence their two-day meeting, traders are betting on a 65% probability the world’s most influential central bank will decide to lower borrowing costs by a bigger 50 basis points, according to the CME Group’s (NASDAQ:) FedWatch Tool.

Odds favoring a smaller 25-bps reduction stand at 35% from 66% a week earlier, as investors focused on remarks from a former policymaker supporting an outsized move and signs of a cooling labor market, among other indicators.

“Retail sales being higher is suggestive that the economy is modestly better,” said Michael Green, chief strategist and portfolio manager at Simplify Asset Management.

“I would say that the actual underlying data is relatively mixed and markets are in a bit of a holding pattern, waiting for (Chair Jerome) Powell and the Federal Reserve tomorrow.”

September has historically been weak for U.S. equities, with the benchmark S&P 500 down about 1.20% for the month on an average since 1928. However, factoring in the day’s gains, the index is up about 0.20% so far this September.

Still, a survey of BofA fund managers showed global investor sentiment improved in September 2024 for the first time since June on optimism around a soft landing and rate cuts by the U.S. central bank.

Among other movers, Intel (NASDAQ:) rose 2.3% after signing Amazon.com (NASDAQ:)’s cloud services unit as a customer to make custom artificial-intelligence chips. Amazon.com gained 2%.

Viasat dropped 6.1% after brokerage J.P.Morgan downgraded it to “neutral” from “overweight”. 

Advancing issues outnumbered decliners by a 2.93-to-1 ratio on the NYSE, and by a 2.32-to-1 ratio on the Nasdaq.

The S&P 500 posted 30 new 52-week highs and no new lows, while the Nasdaq Composite recorded 62 new highs and 27 new lows.