Wall Street rises ahead of key Fed decision; S&P 500 nears record high

Microsoft gains after new share buyback plan, dividend hike

Wall Street's main stock indexes rose on Tuesday, with the S&P 500 hitting an intraday record high ahead of a crucial Federal Reserve interest-rate decision, after fresh economic data allayed worries of a sharp slowdown in the US economy.

The benchmark index touched 5,670.81 earlier in the session, erasing the last of a deep selloff that lasted through late July and early August, sparked by an unexpected spike in unemployment.

The latest report from the Commerce Department shows that retail sales rose unexpectedly in August, after a decline in auto dealership receipts was offset by strength in online purchases, suggesting the economy was on solid footing through most of the third quarter.

 

Microsoft gave one of the biggest boosts to the S&P 500, with a 1.0 per cent rise on the day after the AI-frontrunner's board approved a new $60-billion share buyback program and hiked its quarterly dividend by 10 per cent.

Other rate-sensitive growth stocks such as Alphabet and Tesla added 0.70 per cent and 2.10 per cent, while Nvidia edged up 0.30 per cent, pushing the broader chips index higher 0.94 per cent.

The blue-chip Dow also traded at a record high. The Russell 2000 index tracking small caps - which tend to perform better in a low-interest-rate environment - outperformed with a 1.7 per cent rise.

At 11:35 a.m. ET, the Dow Jones Industrial Average rose 153.14 points, or 0.37 per cent, to 41,775.22, the S&P 500 gained 22.75 points, or 0.40 per cent, to 5,655.84 and the Nasdaq Composite gained 115.76 points, or 0.66 per cent, to 17,707.88.

Eight of the 11 S&P 500 sectors traded higher, led by a 1.2 per cent rise in Consumer Discretionary, while healthcare stocks were the biggest losers, with a 0.40 per cent decline.

With Fed officials scheduled to commence their two-day meeting, traders are betting on a 59 per cent probability the world's most influential central bank will decide to lower borrowing costs by 50 basis points, according to the CME Group's FedWatch Tool.

Odds favoring a 25-bps reduction stand at 41 per cent from 66 per cent a week earlier, as investors focused on remarks from a former policymaker supporting an outsized move and signs of a cooling labor market, among other indicators.

"The economy is slowing but it's not really in a bad spot.

The Fed doesn't cut when things are going well," said Paul Nolte, senior wealth advisor and market strategist for Murphy & Sylvest.

"Investors have already done a pretty good job of bidding up the market. That's where the press conference tomorrow is going to be very important. If they talk about some risks in the market, we could see it sell off."

September has historically been weak for US equities, with the benchmark S&P 500 down about 1.20 per cent for the month, on an average, since 1928. However, factoring in the day's gains, the index is up about 0.14 per cent so far this September.

Among other movers, Intel rose 6.20 per cent after signing Amazon.com's cloud services unit as a customer to make custom artificial-intelligence chips. Amazon.com gained 1.70 per cent.

Advancing issues outnumbered decliners by a 2.94-to-1 ratio on the NYSE, and by a 2.48-to-1 ratio on the Nasdaq.

The S&P 500 posted 47 new 52-week highs and no new lows, while the Nasdaq Composite recorded 113 new highs and 47 new lows.