Interest Rate Optimism May Lead To Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to move to the upside following the mixed performance seen in the previous session.

Stocks are likely to benefit from optimism about the outlook for interest rates ahead of the Federal Reserve’s monetary policy announcement on Wednesday.

While the Fed is widely expected to lower interest rates, there remains some debate about the size of the rate cut.

CME Group’s FedWatch Tool is currently indicating a 67.0 percent chance of a half point rate cut and a 33.0 percent chance of a quarter point rate cut.

Whether the Fed decides to cut rates by 25 or 50 basis points, the central bank is still expected to continue lowering rates over the remainder of the year.

The futures remained positive following the release of a Commerce Department report unexpectedly showing a modest increase by U.S. retail sales in the month of August.

The Commerce Department said retail sales inched up by 0.1 percent in August after surging by an upwardly revised 1.1 percent in July.

The uptick surprised economists, who had expected retail sales to dip by 0.2 percent compared to the 1.0 percent jump originally reported for the previous month.

Excluding a slight pullback by sales by motor vehicle and parts dealers, retail sales still crept up by 0.1 percent in August after climbing by 0.4 percent in July. Ex-auto sales were expected to rise by 0.2 percent.

U.S. stocks ended on a mixed note on Monday as investors looked ahead to the Federal Reserve’s monetary policy announcement later this week and stayed largely cautious and selective with regard to their moves.

Among the major averages, the Dow hit a new record high and ended up 228.30 points or 0.6 percent at 41,622.08 and the S&P 500 settled at 5,633.09 with a small gain of 7.07 points or 0.1 percent, while the Nasdaq closed lower by 91.85 points or 0.5 percent at 17,592.13.

Oracle Corporation climbed more than 5 percent. Meta Platforms, Accenture, Cisco Systems and IBM also closed notably higher.

Bank of America, Wells Fargo, Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America and Morgan Stanley posted strong gains. Visa Inc. and Mastercard also ended on a firm note.

Exxon Mobil Corporation and Chevron Corporation recorded impressive gains.

Procter & Gamble, Merck, Abbot Laboratories and Pfizer moved up sharply. T.Mobile, Linde, GE Aerospace, Verizon Communications, Blackstone, AT&T, Nike and Walt Disney also moved notably higher.

Tesla, Broadcom, Adobe Inc., Amazon, Nvidia Corporation, Apple Inc. and Intuit Inc. ended with sharp to moderate losses.

On the economic front, the Federal Reserve Bank of New York released a report showing regional manufacturing grew for the first time in nearly a year in the month of September.

The New York Fed said its general business conditions index surged to a positive 11.5 in September from a negative 4.7 in August, with a positive reading indicating growth. Economists had expected the index to inch up to a negative 3.9.

With the sharp increase, the index returned to positive territory for the first time since hitting a positive 9.1 last November.

The much bigger than expected increase by the headline index partly reflected a significant turnaround by new orders, as the new orders index spiked to a positive 9.4 in September from a negative 7.9 in August.

Commodity, Currency Markets

Crude oil futures are inching up $0.05 to $70.14 a barrel after jumping $1.44 to $70.09 a barrel on Monday. Meanwhile, after edging down $1.80 to $2,608.90 an ounce in the previous session, gold futures are falling $12.30 to $2,596.60 an ounce.

On the currency front, the U.S. dollar is trading at 140.90 yen compared to the 140.62 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1120 compared to yesterday’s $1.1133.

Asia

Asian stocks turned in a mixed performance on Tuesday as investors braced for the Federal Reserve’s most anticipated meeting in years.

A two-day policy meeting of the U.S. Federal Reserve gets underway later today, with markets seeing a nearly 70 percent probability of a 50 basis point rate cut to the 4.75-5.0 percent range on Wednesday.

Gold ticked higher in Asian trading even as the dollar sell-off paused ahead of the U.S. retail sales data for August due later in the day.

Oil extended overnight gains due to disruptions in U.S. production caused by Hurricane Francine and expectations of a Federal Reserve interest rate cut.

Markets in mainland China and South Korea were closed for public holidays.

Hong Kong’s Hang Seng Index rallied 1.4 percent to close at 17,660.02 as hopes of fiscal stimulus measures to bolster the Chinese economy lifted property developers and technology stocks.

Japanese markets fell sharply as export-related stocks came under selling pressure due to a stronger yen.

The Nikkei 225 Index dropped 1.0 percent to 36,203.22, while the broader Topix Index settled 0.6 percent lower at 2,555.76.

Sony Corp., Toyota and Nissan all fell around 2 percent after the dollar briefly weakened to the lower 140-yen range.

Tech investor Softbank Group tumbled 3.1 percent, chip-related Advantest plummeted 5.6 percent and Tokyo Electron gave up 5.2 percent.

Australian markets booked a fourth consecutive session of gains to reach a new high, led by technology, real estate and energy stocks.

The benchmark S&P/ASX 200 Index edged up 0.2 percent to 8,140.90, while the broader All Ordinaries Index gained 0.2 percent to close at 8,361.20.

Xero rallied 2.6 percent after announcing its acquisition of Syft Analytics for US$70 million.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dipped 0.3 percent to 12,671.95.

Europe

European stocks have advanced on Tuesday ahead of the Federal Reserve’s interest rate decision on Wednesday and the Bank of England’s announcement on Thursday.

The Fed is widely expected to lower interest rates, but there remains some debate about the size of the rate cut.

The U.K. CPI report due on Wednesday may significantly influence market speculation for the Bank of England interest rate path for the last quarter of the year.

Meanwhile, the headline German ZEW Economic Sentiment Index dropped further to 3.6 in September from 19.2 reported in August, a survey showed today.

The U.K.’s FTSE 100 Index, the German Index and the French CAC 40 Index have all climbed by 0.7 percent.

In corporate news, Swiss chocolate maker Barry Callebaut has jumped after Barclays raised its rating on the stock to “overweight” from “underweight”.

British home improvement retailer Kingfisher has also surged after raising the lower end of its fiscal 2025 profit guidance.

Meanwhile, Playtech, a gambling software development company, has tumbled after it entered into a definitive agreement for the sale of Snaitech S.p.A. and certain of its units to Flutter Entertainment.

Essentra, a leading global manufacturer, and provider of essential components and solutions, has also plummeted after downgrading its full-year profit expectations, citing market challenges.

U.S. Economic News

Retail sales in the U.S. unexpectedly crept higher in the month of August, according to a report released by the Commerce Department on Tuesday.

The Commerce Department said retail sales inched up by 0.1 percent in August after surging by an upwardly revised 1.1 percent in July.

The uptick surprised economists, who had expected retail sales to dip by 0.2 percent compared to the 1.0 percent jump originally reported for the previous month.

Excluding a slight pullback by sales by motor vehicle and parts dealers, retail sales still crept up by 0.1 percent in August after climbing by 0.4 percent in July. Ex-auto sales were expected to rise by 0.2 percent.

At 9:15 pm ET, the Federal Reserve is scheduled to release its report on industrial production in the month of August. Industrial production is expected to rise by 0.2 percent in August after falling by 0.6 percent in July.

The National Association of Home Builders is due to release its report on homebuilder confidence in the month of September at 10 am ET. The housing market index is expected to inch up to 40 in September after dipping to 39 in August.

Also at 10 am ET, the Commerce Department is scheduled to release its report on business inventories in the month of July. Business inventories are expected to climb by 0.3 percent in July, matching the increase seen in June.

Dallas Federal Reserve President Lorie Logan is also due to give welcome remarks before the Eleventh District Banking Conference hosted by the Federal Reserve Bank of Dallas at 10 am ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $13 billion worth of twenty-year bonds.