New York Stock Exchange operators (GETTY IMAGES NORTH AMERICA / SPENCER PLATT)
The New York Stock Exchange opened higher on Monday, attracted by two indicators which testify to the resilience of the American economy, even if they distance the prospect of a marked rate cut on Wednesday.
At around 2:05 p.m., the Dow Jones was up 0.25%, the Nasdaq index was up 0.75% and the broader S&P 500 index was up 0.47%.
On Monday, the Dow Jones closed at a record high. In early trading on Tuesday, the S&P 500 approached its all-time high in the session.
Wall Street welcomed today’s macroeconomic data, which even gave it an additional boost.
Retail sales rose 0.1% month-on-month in August, compared with economists’ average forecast of a 0.2% decline.
Among the dynamic sectors, online commerce, which benefited Amazon (+2.13%) and Shopify (+1.13%).
The other indicator of the day showed that industrial production rose by 0.8% month-on-month in August, its fastest pace since February, significantly above the 0.2% expected.
High Frequency Economics “sees no urgency or need for massive monetary easing in light of today’s data,” it said in a note.
“The economy continues to grow, it creates jobs, and inflation is still above 2%, so I don’t see any reason for the Fed (US central bank) to lower its key rate by half a point,” agreed Adam Sarhan of 50 Park Investments.
The Fed meets Tuesday and Wednesday to decide on the direction of its monetary policy, with New York’s market divided between the assumptions of a quarter and half-percentage point cut.
In the wake of macroeconomic publications, bond rates have tightened. The yield on 2-year US government bonds stood at 3.61%, compared to 3.55% the previous day at the close.
“On the eve of the decision, retail sales and industrial production do not help at all the supporters of a half-point cut,” insisted Kit Juckes, of Societe Generale.
But some refuse to give up and the operators still attribute, on average, a probability of 65% to the scenario of a half-point cut.
ForexLive’s Adam Button, this could be more of a hedging strategy in case the Fed opts for half a point, rather than a show of conviction.
Even if the Federal Reserve chose to cut its rate by only a quarter of a point, “I would not be surprised if we had an acceleration (of the indices) tomorrow,” warns Adam Sarhan.
Investors are therefore more interested, according to Kit Juckes, in the final rate at which the Fed will arrive at the end of its cycle of reductions, rather than in a one-off decision.
On the stock market, usually lagging behind its competitors on Wall Street, Intel was making waves (+3.11%) after a series of announcements on Monday, after the market closed.
The Santa Clara (California) group has notably postponed by two years its plans for factories in Germany and Poland. It will also house its chip manufacturing activities for other companies in a dedicated subsidiary.
Meta advanced (+1.04%) after unveiling a new version of Instagram for teenagers, which includes many restrictions aimed at protecting young users from harmful content or unwanted contact.
Hewlett Packard Enterprise (HPE) was helped by a recommendation upgrade from Bank of America analysts, who see significant synergies with telecommunications equipment maker Juniper Networks, which is currently being acquired.
Apple remained behind (-0.25%), with a share price now lower than that prior to the launch of its new product range, including the iPhone 16, a week ago. Microsoft (+1.76%) threatens to once again steal its title of world’s largest capitalization.
The software and remote computing giant capitalized on the announcement of an increased dividend and a new share buyback program worth $60 billion.
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