By Johan M Cherian and Poorvi Agarwal
(Reuters) – Wall Street's main stock indexes rose on Tuesday, hitting record highs during the day ahead of the Federal Reserve's key interest rate decision. Fresh economic data allayed concerns of a sharp slowdown in the U.S. economy.
The benchmark index rose to 5,670.81 early in the session, ending a massive sell-off that began in late July and early August after an unexpected rise in unemployment.
The Commerce Department's latest report showed retail sales unexpectedly rose in August while online purchases strengthened after auto dealership receipts declined, suggesting the economy was in strong shape for most of the third quarter.
Microsoft (NASDAQ:) provided the biggest boost to the S&P 500, rising 1.0% on the day after the AI-pioneer's board approved a new $60 billion share buyback program and raised its quarterly dividend by 10%.
Other rate-sensitive growth stocks such as Alphabet (NASDAQ:) and Tesla (NASDAQ:) gained 0.70% and 2.10%, while Nvidia (NASDAQ:) added 0.30%, pushing the broader chips index up 0.94%.
The blue-chip Dow also traded at a record high. An index tracking small caps — which tend to perform better in a low-interest-rate environment — outperformed, gaining 1.7%.
At 11:35 a.m. ET, the S&P 500 rose 22.75 points, or 0.40%, to 5,655.84 and the S&P rose 115.76 points, or 0.66%, to 17,707.88.
Eight of the S&P 500's 11 sectors rose, led by consumer discretionary's 1.2% gain, while healthcare stocks fell the most by 0.40%.
As Fed officials are set to begin a two-day meeting, traders are betting on a 59% chance that the world's most influential central bank will decide to lower borrowing costs by 50 basis points, according to CME Group's (NASDAQ:) FedWatch tool.
The odds in favor of a 25-bps cut rose to 41% from 66% a week ago, as investors focused on comments from a previous policymaker supporting a bigger move and signs of a slowdown in the labor market, among other indicators.
“The economy is slowing, but it's not really in bad shape. The Fed doesn't cut when things are going well,” said Paul Nolte, senior wealth advisor and market strategist at Murphy & Silvest.
“Investors have already done a good job of bidding up the market. That's why tomorrow's press conference is going to be very important. If they talk about some risks in the market, we could see that as a sell-off.”
The month of September has been historically weak for US equities, with the benchmark S&P 500 down about 1.20% on average this month since 1928. However, taking into account the day's gains, the index is up about 0.14% so far this September.
Among other movers, Intel (NASDAQ:) gained 6.20% after it signed the cloud services unit of Amazon.com (NASDAQ:) as a customer to make custom artificial-intelligence chips. Amazon.com gained 1.70%.
Advancing issues outnumbered declining ones 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 recorded 47 new 52-week highs and no new lows, while the Nasdaq Composite recorded 113 new highs and 47 new lows.