On Tuesday afternoon, the US equity markets displayed positive momentum, with significant upward movement seen across major benchmarks. The S&P 500 index experienced a slight increase of less than 0.1%, closing at 5,634.2. Meanwhile, the Nasdaq Composite rose by a marginal 0.1%, landing at 17,615.4, and the Dow Jones Industrial Average also ticked up less than 0.1%, reaching 41,634.6.
This performance was bolstered primarily by gains in the energy and consumer discretionary sectors, contrasting with declines observed in healthcare and real estate sectors, which weighed on the overall market sentiment. In the bond market, a notable uptick in Treasury yields was reported. The 10-year yield increased by 2.1 basis points to 3.64%, while the two-year rate saw a rise of 4.8 basis points, now sitting at 3.6%.
This shift coincided with the anticipation surrounding the Federal Reserve's imminent policy move, with the probability of a significant 50 basis-point reduction scheduled for the next day peaking at 61% on Tuesday, up from 34% just a week prior, as indicated by the FedWatch Tool. Conversely, the remaining 39% of market participants anticipate a more modest 25 basis-point cut, a drop from 66% a week earlier.
It’s imperative to note that the Federal Open Market Committee (FOMC) policy announcement planned for 2 pm ET on Wednesday is particularly crucial, as it will be the final statement released before the presidential elections scheduled for November 5. Adding depth to the discussion, a recent survey by CNBC revealed that 84% of the 27 participants, comprising economists, fund managers, and strategists, predict a quarter-point cut by the Fed, while only 16% foresee a half-point reduction.
This disparity suggests that survey respondents are seemingly less apprehensive about the economy than futures markets, indicating a belief that the Fed has the flexibility to implement gradual rate adjustments if necessary. Shifting focus to economic indicators, US retail sales demonstrated unexpected resilience, increasing by 0.1% in August, surpassing market expectations which had forecasted a 0.2% decline based on a Bloomberg survey.
This comes on the heels of a robust 1.1% rise recorded in the previous month. Even when factoring in a slight retreat of 0.1% in motor vehicle sales, retail sales remained stable at a 0.1% increase, which is noteworthy against the backdrop of anticipated 0.2% growth and a prior 0.4% rise in July. When excluding motor vehicles and the 1.2% decline in gasoline station sales, the retail landscape still reflected a modest increase of 0.2% in August following a steady 0.4% gain in July. In the realm of corporate updates, BofA Securities provided an upgrade for Hewlett Packard Enterprise, designated by the ticker symbol $HPE, raising its investment rating from neutral to buy, alongside an increase in its price target to $24 from an earlier estimate of $21.
This bullish sentiment translated into a notable 5.6% intraday surge in shares of HPE, positioning it as the top gainer within the S&P 500 index. Furthermore, the commodities market saw a significant jump in West Texas Intermediate crude oil futures, climbing 2% to reach $71.52 per barrel, reflecting ongoing volatility and interest in oil prices amidst global economic uncertainties..