S&P 500 falls after touching record before key Fed decision: Live updates

The S&P 500 pulled back after hitting a record high Tuesday as the market awaited the Federal Reserve’s key interest rate cut decision.

The broad market index was last down 0.2% at 5,623, after earlier touching an all-time high of 5,670.81. The Nasdaq Composite fell 0.5%, and the Dow Jones Industrial Average fell 78 points, or 0.2%. The 30-stock Dow also reached a fresh all-time high earlier.

The S&P 500’s move to an all-time high earlier in the session comes during a historically tough period for the market. September has been the worst month for the benchmark over the past 10 years, averaging a 1.3% monthly loss, according to FactSet data.

Traders also overcame late-summer headwinds stemming from concerns over the health of the U.S. economy. Disappointing jobs and manufacturing data in August sparked a large one-day sell-off. However, equities were able to rebound due to more constructive data releases and expectations of the Fed lowering rates.

Wall Street is on standby for the Fed’s long-anticipated rate cut Wednesday afternoon, a move that could help boost earnings growth for companies following a backdrop of steep borrowing costs and high inflation. The Fed first embarked on its aggressive hiking campaign in March 2022.

The latest retail sales data indicated solid consumer health. Retail sales rose 0.1% in August versus economists’ estimates for a 0.2% decline, according to Dow Jones. Excluding autos, the number also came in at a 0.1% increase, which slightly missed the 0.2% consensus forecast.

While investors expect a cut Wednesday, the market is divided on the size of the potential reduction. Traders are currently pricing in a 59% chance that the central bank eases rates by 50 basis points, according to CME Group’s FedWatch Tool. That is up from a roughly 47% chance Friday, but slightly lower than the 67% earlier forecast on Tuesday. One basis point equals 0.01%.

A steeper rate cut may spark concerns about the health of the economy, according to some investors.

“A 50 basis point cut may further imply a downgrade of the Fed’s view on the labor market — that would be more of a concerning sign,” said Adam Turnquist, chief technical strategist at LPL Financial. “I think there’s going to be a pretty big deviation between what the market is expecting, and what the Fed is going to project.”

Intel shares jumped 3.4% after the company said it plans to make its foundry business a subsidiary. The Biden administration also awarded the company up to $3 billion in funding through the CHIPS Act.