Investors Await Clarity on Rate Cut Size – On Tuesday, stocks ended the trading session nearly unchanged. Investors remain uncertain about the size of the Federal Reserve’s expected rate cut, which will be announced Wednesday.
The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC) each lost about 0.2%, reversing earlier gains. Meanwhile, the Nasdaq Composite (^IXIC) finished just slightly above flat.
“The market is in a holding pattern ahead of the Fed meeting,” said Edward Moya, senior market analyst at OANDA. “Investors are waiting to see how dovish the Fed will be.” The central bank’s two-day meeting began Tuesday, with a rate cut widely expected. However, the size of the cut is still a topic of debate among analysts.
Split Views on Rate Cut Size
Some analysts expect the Federal Reserve to implement a larger 50 basis point cut to stimulate the economy. Others believe a smaller 25 basis point cut would signal the Fed’s confidence in the economy. By Tuesday afternoon, traders saw a 65% chance of a 50 basis point cut, slightly up from 62% a day earlier. The odds of a 25 basis point cut stood at 35%, according to the CME FedWatch tool.
“The Fed is in a tough spot,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “If they cut too much, it could unsettle the market. If they don’t cut enough, it might send the wrong message about the economy.”
Retail Sales Data Adds to Uncertainty
Alongside the upcoming Fed decision, investors were also digesting retail sales data, which surpassed expectations in August. This positive report marks the last significant data point before the Fed makes its decision. However, despite the strong retail numbers, investors are still unsure about the magnitude of the cut.
“The retail sales data was solid, but it’s not a game-changer,” noted Moya. “The Fed will cut rates tomorrow, but the question is by how much.”
Tech Stocks See Positive News
In the tech sector, Intel (INTC) saw its stock rise after announcing that Amazon (AMZN) will be a multibillion-dollar customer for its AI chips. This deal helped renew confidence in tech stocks, which have struggled in recent weeks.
Additionally, Microsoft (MSFT) announced a new plan to buy back up to $60 billion in shares and increased its dividend by 10%. These moves provided a further boost to the tech sector and helped balance the day’s market performance.
Investors Await Clarity on Rate Cut Size : Fed’s Decision Holds the Market’s Attention
As investors wait for the Federal Reserve’s rate cut announcement, the market remains in a holding pattern. Uncertainty over the size of the cut continues to influence sentiment. While strong retail sales data and positive tech news provided some support, the real focus will be on the Fed’s next move and its impact on the economy.
