In Tuesday’s trading, the US stock market experienced slight declines as investors processed key economic indicators and the ongoing Federal Reserve’s September policy meeting. Retail sales data for August indicated a robust increase of 0.6%, significantly surpassing the projected 0.2% rise, underscoring resilient consumer spending amidst a cooling labor market and persistent inflationary pressures. The S&P 500 and Nasdaq Composite both edged down by less than 0.1%, while the Dow Jones Industrial Average fell nearly 0.3%, reflective of a cautious market atmosphere ahead of the Fed’s anticipated interest rate decision set for Wednesday.
The Fed’s two-day policy meeting was further marked by unusual political dynamics, notably an appeals court ruling that thwarted President Trump’s attempts to remove Fed governor Lisa Cook from her position, ensuring her participation at the meeting. New Fed governor Stephen Miran was also sworn in just in time to engage in the critical rate-setting discussions.
Market participants are largely anticipating the Fed to announce a 25-basis-point rate cut, with a remarkable 96% probability factored into market expectations. However, the spotlight will be on Fed Chair Jerome Powell’s remarks during the press conference, as traders speculate on future monetary policy directions against the backdrop of prevailing economic challenges.
Among notable stock movements, Oracle’s shares surged nearly 3% following reports of its involvement in a US-China agreement regarding TikTok, allowing the platform to operate within the US under enhanced oversight. Tesla’s stock rose about 1%, recovering earlier losses this year after CEO Elon Musk made a personal investment in the company. Other key stocks, including Nvidia, Microsoft, and Alphabet, experienced minor declines.
In commodities, gold prices reached a record high above $3,700 an ounce, driven by a weaker dollar and expectations of upcoming Fed rate cuts. Novo Nordisk shares climbed over 2% in light of positive developments regarding its obesity drug research, despite the stock being down for the year.
The major indexes concluded with the Dow Jones Industrial Average dropping 137 points, or 0.3%, settling at 45,746. Both the S&P 500 and Nasdaq Composite saw slight recessions after reaching record highs on Monday. Fund managers are showing the most optimism for stocks since February, based on Bank of America’s latest survey; however, caution remains ahead of the Fed’s crucial rate decision.
Investor sentiment was influenced by the Commerce Department’s report highlighting a 0.6% increase in retail sales for August, three times the anticipated 0.2% rise, propelled by solid clothing and e-commerce sales. Previous sales data for July was also revised upwards, showcasing consumer resilience amidst slower job growth and inflation concerns. Additionally, unexpected increases in import prices have added to inflation worries.
The Fed’s policy meeting commenced under unprecedented political conditions with an appeals court ruling favoring Lisa Cook against President Trump’s efforts for her removal, ensuring her vote in the discussions. Concurrently, Trump-nominated Stephen Miran was confirmed by the Senate and sworn in just prior to participating in the rate-setting meeting. Market forecasts indicate a 96% likelihood of a 25-basis-point reduction, with a slim 4% chance for a larger half-point cut. Investors are keenly focused on Powell’s comments to gauge the Fed’s future stance heading into the end of the year.
In terms of stock performance, Oracle (ORCL) led the way with nearly a 3% increase due to its involvement in a significant TikTok agreement. Tesla (TSLA) rose nearly 2% as Elon Musk’s share purchase helped the company recover its year-to-date status, while Amazon (AMZN) advanced over 1% after announcing its upcoming Prime Day. Conversely, major declines were noted in companies such as UnitedHealth (UNH), down nearly 2%, and Nvidia (NVDA), which fell by 0.82%.
Trading activity was notable, with Oracle Corporation leading the dollar volume at approximately $12.09 billion, followed closely by Apple Inc. (AAPL) with around $10.11 billion. The health of consumer spending, anticipated rate cuts, and political developments surrounding trade negotiations are setting the stage for a volatile week ahead in the market.
