ARTICLE AD BOX
Traders work on the floor of the New York Stock Exchange.
Brendan Mcdermid | Reuters
The S&P 500 hit a record high Tuesday as the market awaited the Federal Reserve's key interest rate cut decision.
The broad market index was last up 0.4% at the 5,650 level, after earlier touching a new record high of 5,670.81. The Nasdaq Composite gained 0.7%, and the Dow Jones Industrial Average advanced 103 points, or 0.3%. The 30-stock Dow also reached a fresh all-time high.
S&P 500 in 2024
The S&P 500's move to an all-time high comes during a historically tough period for the market. September has been the worst month for the benchmark over the last 10 years, averaging a 1.3% monthly loss, according to FactSet data.
Traders also overcame late-summer headwinds stemming from concerns over the health of the U.S. economy. Disappointing jobs and manufacturing data in August sparked a large one-day sell-off. However, equities were able to rebound thanks to more constructive data releases and expectations of the Fed lowering rates.
Wall Street is on standby for the Fed's long-anticipated rate cut Wednesday afternoon, a move that could help boost earnings growth for companies following a backdrop of steep borrowing costs and high inflation. The Fed first embarked on its aggressive hiking campaign in March 2022.
The latest retail sales data indicated solid consumer health. Retail sales rose 0.1% in August versus economists' estimates for a 0.2% decline, according to Dow Jones. Excluding autos, the number also came in at a 0.1% increase, which slightly missed the 0.2% consensus forecast.
While investors expect a cut Wednesday, the market is divided on the size of the potential reduction. Traders are currently pricing in a 59% chance that the central bank eases rates by 50 basis points, according to CME Group's Fed Watch tool. That's up from a roughly 47% chance Friday, but slightly lower from the 67% earlier forecasted on Tuesday. One basis point equals 0.01%.
A steeper rate cut may spark concerns about the health of the economy, according to some investors.
"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. "I think there's going to be a pretty big deviation between what the market is expecting, and what the Fed is going to project."
Microsoft rose 1% after the tech giant hiked its quarterly dividend by 10.7% to 83 cents per share. The company also approved a $60 billion buyback program. Intel shares jumped more than 6% after the company said it plans to make its foundry business a subsidiary. The Biden administration also awarded the company up to $3 billion in funding through the Chips Act.
Can't rule out the potential for a sell-off after a half-point rate cut, Nomura says
The market reaction to a half point rate cut from the Federal Reserve on Wednesday could go both ways, according to Nomura.
"A 50bp rate cut would normally be assumed to send the market higher in a straightforward way, but we cannot rule out the potential for a rate cut of that size to send the market lower instead, as it could signal to investors that they should be more worried about a possible recession ahead," the Wall Street firm said in a note.
Nomura believes it's likely to see investors start to pare back on their U.S. equity exposure after the Fed meeting and in the lead up to the presidential election.
"It is also not hard to imagine that investors of all stripes—and not just macro investors—may start walking back their outstanding long positions in US equities in the run-up to a US presidential election whose outcome is highly uncertain," the firm said.
— Yun Li
Dollar gains against the yen
The dollar strengthened 0.8% to 141.74 against the yen ahead of the Bank of Japan's policy meeting on Sept. 19-20.
Week to date, the greenback has appreciated 0.6% against the yen, but still is 3.1% weaker on the month.
Economists and analysts polled by CNBC all forecast the central bank maintaining interest rates at their current levels at its upcoming meeting. However, the outlook for a rate hike in the October and December meetings is less certain.
Yen versus the dollar in a one-month period
— Hakyung Kim
Intel leads the Dow higher
Intel shares on Tuesday
— Hakyung Kim
China Internet ETF, China Large-Cap ETF both on pace for best day since August
Shares of the KraneShares CSI China Internet ETF (KWEB) and iShares China Large-Cap ETF (FXI) moved higher in morning trading, putting them each on pace for their best day since last month.
KWEB jumped around 2% and is heading for its best day since Aug. 29, when shares rose 2.51%. Meanwhile, FXI was up nearly 2% and is heading for its best day since Aug. 16, when the fund gained 2.01%.
KWEB vs. FXI, 1-day
Airbnb leads consumer discretionary higher
Airbnb shares jumped 5.8% Tuesday morning, leading the consumer discretionary sector's broader 1.5% gain.
Aptiv and Pool Corporation also advanced more than 3% to outperform the sector.
— Hakyung Kim
Stocks open higher Tuesday
U.S. stocks began Tuesday's trading session in the green.
The S&P 500 advanced 0.4%. The Dow Jones Industrial Average rose 76 points, or 0.2%. The Nasdaq Composite climbed 0.8%.
— Hakyung Kim
Investors are the most overweight on utilities in more than a decade
Investors are the most overweight on utility stocks since December 2008, according to Bank of America's global fund manager survey.
Funds rotated this month out of cyclical sectors and into defensive sectors such as utilities, according to the survey, which polls about 300 institutional, mutual and hedge fund managers around the world.
These investors are also the most underweight on energy stocks since December 2020 as crude oil futures have sold off steeply this month, according to the survey.
The S&P 500 utility sector has rallied about 24% this year and is ahead more than 3% this month. Utilities are riding tailwinds on the expectation that electricity demand will surge due to artificial intelligence, manufacturing and the electrification of the economy.
The energy sector, on the other hand, has gained about 3% this year and is down more than 5% this month.
— Spencer Kimball
Retail sales showed an unexpected increase in August
People walk past the Gucci store on Fifth Avenue on March 20, 2024 in New York City.
Michael M. Santiago | Getty Images
Retail sales were stronger than expected in August, as consumers showed resilience despite fears of an economic pullback.
The Commerce Department's initial estimate for all sales showed an increase of 0.1% on the month, down sharply from the upwardly revised gain of 2.3% in July but better than the Dow Jones forecast for a decline of 0.2%.
Excluding autos, sales increased 0.1%, slightly lower than the 0.2% consensus estimate. The retail sales numbers are adjusted for seasonal factors but not inflation.
Spending rose 1.7% for miscellaneous stores and 1.4% for online retailers. With oil prices falling, gas stations saw a 1.2% decline in receipts while sales at clothing and furniture stores fell 0.7% each.
—Jeff Cox
Microsoft, Intel, SolarEdge among stocks making biggest premarket moves
Check out the companies making headlines before the bell.
- Microsoft — Shares were up about 2% after the tech giant increased its quarterly dividend by 10.7% to 83 cents per share. The new dividend is payable Dec. 12. The company also approved a new $60 billion share repurchase program.
- SolarEdge Technologies — Shares fell more than 6% after Jefferies downgraded the solar company to underperform from hold. The firm sees rising domestic competition and high inventory levels overseas putting pressure on SolarEdge.
- Intel — The stock jumped roughly 7% after the chipmaker announced it is creating a separate entity for its foundry business, a structure that will allow the unit to have its own board and raise outside funding.
For the full list, read here.
— Pia Singh
Fed likely to cut by just a quarter point, CNBC survey finds
Jerome Powell at Jackson Hole on Aug. 23, 2024.
David A. Grogan | CNBC
Though markets are pricing in a bigger move, respondents to the latest CNBC Fed Survey think the Federal Reserve this week will lower interest rates by just a quarter percentage point.
Of the 27 economists, strategists and fund managers responding, 84% indicate a move of just 25 basis points when the Fed announces its rate decision Wednesday. Traders in the fed funds markets implied a 65% probability of a 50 basis point, or half percentage point, cut as of Tuesday morning, according to the CME Group's FedWatch.
Despite the debate over which way the Fed swings, 74% of respondents said an economic soft landing is still likely.
—Jeff Cox
Microsoft pops after dividend hike, buyback approval
Microsoft CEO Satya Nadella speaks at the company's annual developer conference in Seattle on May 21, 2024.
Max Cherney | Reuters
Microsoft shares were up about 2% in the premarket after the tech giant increased its quarterly dividend 10.7% to 83 cents per share. The new dividend is payable Dec. 12. The company also approved a new $60 billion share repurchase program.
MSFT pops
— Fred Imbert
Stock struggles likely to continue, Wells Fargo says
Wells Fargo investment strategy analyst Austin Pickle noted the stock market's struggles may not relent anytime soon.
"In each of the past seven years, the S&P 500 Index has experienced a late-summer peak and subsequent drawdown ranging from 5% to 20%," he wrote. "Simmering economic concerns, continued geopolitical risks, and increasing doubts about the near-term prospects for artificial intelligence suggest that stocks may continue to struggle this season as well."
— Fred Imbert
European markets open higher
European stocks opened higher Tuesday, as upcoming central bank meetings remain in focus.
The pan-European Stoxx 600 index opened up 0.57%, with all sectors and major bourses in the green. Banks added 0.85%, while construction and materials were 0.8% higher.
It follows a negative start to the week for the regional benchmark, which closed 0.2% lower Monday.
— Karen Gilchrist
Intel pops 8% after company shares plans to create separate foundry business
U.S. President Joe Biden tours the Intel Ocotillo Campus, in Chandler, Arizona, on March 20, 2024.
Kevin Lamarque | Reuters
Intel shares rallied more than 8% in overnight trading after the chipmaker said it will turn its foundry business into a separate entity as the company looks to turn around its business.
CEO Pat Gelsinger said the move would enable Intel's foundry business to "evaluate independent sources of funding." The company is also considering spinning off the business, CNBC reported, citing a person familiar with the matter.
The Biden Administration also awarded Intel up to $3 billion in funding through the CHIPS Act on Monday.
Shares have plummeted more than 58% since the start of 2024.
— Samantha Subin, Rohan Goswami, Kif Leswing
English (US) ·