Wall Street Stays Stuck as Market Awaits Fed Rate Cut Decision

Market Movements Before Fed's Decision

U.S. stock indexes remained stuck in place on Tuesday as Wall Street made few big moves ahead of what’s expected to be the first cut to interest rates in more than four years. The Standard & Poor's 500 edged up by 1.49 points, or less than 0.1%, to 5,634.58. It remains 0.6% below its all-time closing high set in July, and it briefly rose above that mark during the morning. The Dow Jones industrial average slipped 15.90 points, or less than 0.1%, to 41,606.18 from its own record set the day before, while the Nasdaq composite edged up 35.93 points, or 0.2%, to 17,628.06.

Key Drivers and Upcoming Fed Announcement

• Intel helped drive the market with a gain of 2.7% after a series of announcements, including an expansion of its partnership with Amazon Web Services to produce custom chips.
• Intel also detailed plans to build its foundry business.

That helped offset a 2.2% drop for Philip Morris International, which said it expects to record a loss of $220 million against its third-quarter results because of the sale of its Vectura Group inhaled-therapeutics subsidiary.

The calm movements for the U.S. stock market overall were a sharp departure from prior weeks, where the S&P 500 briefly fell nearly 10% below its all-time high.

Evolving Economic Landscape

Excitement has built for an announcement scheduled for Wednesday afternoon from the Federal Reserve. The unanimous expectation is that the Fed will cut the federal funds rate, which has been sitting in a range of 5.25% to 5.50% for over a year.

Lower rates would stimulate the economy, which has slowed due to high borrowing costs, and shift the Fed's focus to protecting the job market.

• Criticism exists regarding the timing of a potential cut.

Overall anticipation is for a cut of half a percentage point on Wednesday, although a traditional-size move of a quarter of a percentage point is still on the table.

Consumer Spending and Industrial Production

• Recent economic reports showed mixed signals.

One report indicated U.S. shoppers spent more than expected last month, suggesting strength in the economy, yet underlying details were less encouraging.

“This data isn’t going to decide the issue for the Fed, one way or the other,” stated Chris Larkin, managing director at E-Trade from Morgan Stanley.

Meanwhile, the industrial production report from August surprised positively against economists' expectations.

Global Market Response

In the bond market, the 10-year Treasury yield rose to 3.64% from 3.62% late Monday. The two-year yield rose to 3.59% from 3.56%.

Internationally, Japan’s Nikkei 225 dropped 1%, influenced by a strengthening yen impacting export profits.

Overall, modest gains were observed across European markets.