Wall Street surged on Tuesday, with the S&P 500 nearing record highs as investors focused on the upcoming Federal Reserve decision. Major players like Microsoft and Intel led the gains, driving market optimism as traders bet on a potential Fed rate cut.
Key Takeaways
Microsoft surged 2.3% after announcing a $60 billion buyback program and dividend hike.
Intel gained 2.3% following its AI chip deal with Amazon Web Services.
U.S. retail sales rose unexpectedly by 0.1% in August, boosting market confidence.
Investors are betting on a Fed rate cut, with a 68% chance of a 50 basis point reduction.
S&P 500 Gains as Investors Await Fed Rate Cut
The Fed rate cut decision has been the focal point for investors this week, with anticipation building around whether the Federal Reserve will opt for a 25 or 50 basis point reduction in interest rates. As of Tuesday, market predictions showed a 68% chance of a 50 basis point cut, signaling a more aggressive move by the central bank. A smaller 25 basis point cut had a 32% probability, according to the CME Group’s FedWatch Tool.
The potential for a significant rate cut helped the S&P 500 gain 0.38% to 5,654.59 points, inching closer to its all-time intraday high. The Nasdaq Composite also rose 0.72% to 17,719.03 points, driven by the strong performance of tech stocks.
Microsoft’s Share Buyback and Intel’s Amazon Deal Fuel Gains
Microsoft surged 2.3% after announcing a massive $60 billion share buyback program and a 10% increase in its quarterly dividend. This move reassured investors of Microsoft’s continued strength in the market, particularly as it looks to expand its AI-driven products and services.
Intel also saw its stock rise 2.3% after securing a major deal with Amazon Web Services (AWS) to produce custom AI chips. This partnership solidifies Intel’s place in the rapidly growing AI sector, giving the company a much-needed boost after facing challenges from competitors like Nvidia and TSMC.
Strong Retail Sales Data Boost Market Confidence
Adding to the market’s bullish sentiment was the release of stronger-than-expected U.S. retail sales data. Retail sales rose 0.1% in August, defying expectations of a 0.2% decline. This report provided reassurance that the U.S. economy remains on solid ground, despite concerns of a potential slowdown.
Michael Green, chief strategist at Simplify Asset Management, remarked, “Retail sales being higher is suggestive that the economy is modestly better,” highlighting how this data contributed to market optimism ahead of the Fed's decision.
Tech Stocks Lead the Rally
Tech stocks, particularly rate-sensitive ones like Alphabet and Tesla, also saw gains, rising by 1.0% and 1.9%, respectively. Nvidia, a key player in the AI space, edged up 0.44%, contributing to the 0.60% rise in the broader chips index. These moves reflect investor confidence in the tech sector's ability to benefit from a potential Fed rate cut, which could lower borrowing costs and boost economic growth.
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