NYSE Data ? The latest update to the NYSE Research page offers insight into recent trading and market quality trends in the U.S. equity market highlighting key liquidity, volume and volatility metrics.
— NYSE ? (@NYSE) September 16, 2024
The S&P 500 and Dow Jones Industrial Average reached new record highs Tuesday as investors awaited the Federal Reserve’s key decision on interest rate cuts. The broad market index climbed 0.2% to 5,642, after touching a new record of 5,670.81 earlier in the day. The Nasdaq gained 0.6%, while the Dow advanced 53 points, or 0.1%.
The 30-stock Dow also reached a fresh all-time high. Wall Street is closely monitoring the Fed’s long-anticipated rate cut decision, expected on Wednesday afternoon. This move could potentially boost earnings growth for companies facing steep borrowing costs and high inflation.
The impressive stock market rally is no longer about a handful of tech stocks.
Per Bloomberg, the S&P’s equal-weighted version — one that gives Target Corp. as much clout as Microsoft Corp. — hit a record high.”#economy #markets #investing #investors @markets pic.twitter.com/2n9k1ucYxT— Mohamed A. El-Erian (@elerianm) September 16, 2024
The Fed began its aggressive rate-hiking campaign in March 2022.
The recent step up in the markets implied probability of a 50 basis point cut this week, rather than 25 bps, has made it the most likely outcome in traders’ opinion.
It was not a function of new data or a changed view of the Federal Reserve’s risk mitigation mindset.
Rather, it’s…— Mohamed A. El-Erian (@elerianm) September 16, 2024
Recent data indicate solid consumer health, with retail sales rising 0.1% in August versus economists’ estimates for a 0.2% decline, according to Dow Jones. Excluding autos, sales also recorded a 0.1% increase, slightly missing the 0.2% consensus forecast.
While investors anticipate a rate cut, the market remains divided on its extent.
The Fed faces a finely balanced set of considerations over whether to cut by 25 or 50 basis points at its meeting that begins today.
The case for 50 comes down to what Fed officials call risk management but what might be thought of as regret minimization. Per former Dallas Fed…
— Nick Timiraos (@NickTimiraos) September 17, 2024
Currently, there’s a 59% chance that the central bank will ease rates by 50 basis points, according to CME Group’s Fed Watch tool.
New highs for S&P 500, Dow
This is up from a 47% chance on Friday but down from a 67% forecast earlier on Tuesday. One basis point equals 0.01%. A larger rate cut might spark concerns regarding the economy’s health, some investors suggest.
“A 50 basis point cut may further imply a downgrade of the Fed’s view on the labor market — that would be more of a concerning sign,” said Adam Turnquist, chief technical strategist at LPL Financial. In corporate news, Intel rose 1.3% after the tech giant hiked its quarterly dividend by 10.7% to 83 cents per share and approved a $60 billion buyback program. The company announced an expanded collaboration with Amazon Web Services to supply Xeon chips and produce a custom artificial intelligence fabric chip, as well as additional U.S. government funding for its foundry business.
Nomura has noted that a half-point rate cut from the Federal Reserve on Wednesday could lead to mixed market reactions. “A 50 bp rate cut would normally be assumed to send the market higher, but we cannot rule out the potential for this to send the market lower, signaling more significant economic concerns,” the Wall Street firm said in a note. In market movements, Intel’s 7.7% rally on Tuesday led the Dow to a new all-time high, with other large-cap tech names like Apple and Microsoft up by 1.9% and 1.4%, respectively.
Consumer discretionary stocks also saw gains, led by Airbnb, which surged 5.8% Tuesday morning. U.S. stocks entered Tuesday’s trading session on a positive note, with the S&P 500 gaining 0.4%, the Dow Jones rising 76 points or 0.2%, and the Nasdaq Composite climbing 0.8%.
