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Stocks finished close to where they started Tuesday as investors expressed uncertainty over the size of the Federal Reserve’s expected rate cut, which is scheduled to be announced Wednesday at the conclusion of the widely anticipated policy meeting.
The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC) lost about 0.2%, reversing momentum from earlier in the day, when they were at or near record levels. The Nasdaq Composite (^IXIC), meanwhile, finished just above the flatline.
Stocks were mostly flat 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 began 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 torn on how the first rate cut will be perceived by the market.
Investors were weighing data that showed retail sales surpassed Wall Street’s estimates in August, with a 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 whether to opt for a substantial rate cut rather than a quarter-point move.
A major aspect of the rate-path debate is the possibility that the bigger cut could prompt panic in markets. At the same time, some on Wall Street suggested the smaller move could also disappoint and spark concern.
As of Tuesday, afternoon traders see odds of 65% on a 50 basis point reduction in rates, compared with 62% a day ago. The chances of a 25 basis point cut stand at 35%, 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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