Stocks lost ground during afternoon trading Tuesday, as investors flashed uncertainty over the size of the Federal Reserve’s expected rate cut, which is scheduled to be announced Wednesday, at the conclusion of the major policy meeting.
The Dow Jones Industrial Average (^DJI) moved down roughly 0.1%, coming off a record-high close for the blue-chip index. The S&P 500 (^GSPC) lost about 0.1%, while the tech-heavy Nasdaq Composite (^IXIC) was just over the flatline.
Stocks are wavering as Wall Street keeps guessing at the odds of a 0.5% Fed rate cut, with just one day to go before officials reveal their monetary policy decision. The central bank’s two-day meeting, which begins Tuesday, is prevailingly expected to bring the first easing in rates since early 2020. Even as the size of the rate cut remains to be seen, investors and market observers are also torn on how the first rate cut will be perceived by the market.
Read more: Fed predictions for 2024: What experts say about the possibility of a rate cut
Investors were weighing data that showed retail sales surpassed Wall Street’s estimates in August, with the focus on signs of a slowdown in consumer spending. The reading is the last piece of data that could factor into the Fed’s thinking on opting for a substantial rate cut rather than a quarter-point move.
Right now, the rate-path debate is focused on the possibility that the bigger cut could prompt panic in markets. At the same time, some on Wall Street suggest the smaller move could also disappoint and spark concern.
As of Tuesday, traders see odds of 63% on a 50 basis point reduction in rates, compared with 62% a day ago. The chances of a 25 basis point cut stand at 37%, per the CME FedWatch tool.
Meanwhile, Intel stock (INTC) popped after its foundry secured Amazon (AMZN) as a multibillion-dollar customer for AI chips. Also helping revive faith in battered tech stocks was Microsoft’s (MSFT) new plan to buy back up to $60 billion in shares and a 10% boost to its dividend.
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