S&P 500 ends little changed as early gains fade before Fed decision By Reuters

By Chuck Mikolajczak

NEW YORK (Reuters) -U.S. stocks closed nearly unchanged on Tuesday, giving up earlier gains that had vaulted the S&P 500 and Dow Industrial Average to record highs as investors braced for the Federal Reserve interest-rate decision on Wednesday.

The benchmark touched 5,670.81 earlier in the session, after fresh economic data eased worries of a sharp slowdown in the U.S. economy.

The latest report from the U.S. Commerce Department showed retail sales rose unexpectedly in August, after a decline in auto dealership receipts was offset by strength in online purchases, suggesting the economy was on solid footing through most of the third quarter.

“Expectations were pretty well entrenched before calling into today’s economic data and what they showed was generally a growth environment, but a relatively slow-growth environment,” said Russell Price, chief economist at Ameriprise Financial (NYSE:) Services in Troy, Michigan.

“What you’re seeing in this afternoon’s trading is the way we pulled off of the all-time high … because tomorrow somebody’s going to be disappointed.”

According to preliminary data, the S&P 500 gained 1.52 points, or 0.04%, to end at 5,634.61 points, while the Nasdaq Composite gained 34.82 points, or 0.20%, to 17,626.95. The Dow Jones Industrial Average fell 5.19 points, or 0.01%, to 41,616.89.

Markets are pricing in a 65% chance the Fed will cut borrowing costs by 50 basis points at the conclusion of its two-day meeting on Wednesday, according to the CME’s FedWatch Tool. Market expectations on the cut’s size have been volatile in recent days, with only a 34% chance of a 50-bps cut priced in as of last week.

Microsoft (NASDAQ:) was the biggest lift to the S&P 500, as shares rose after the AI frontrunner’s board approved a new $60-billion share-buyback program and hiked its quarterly dividend by 10%. 

The blue-chip Dow hit a record high for a second-straight day. The index tracking small caps, which investors view as likely to benefit from a lower rate, outperformed the three major indexes.

Energy, was the best-performing of the 11 major S&P sectors, buoyed by a climb in crude prices, while healthcare was the worst-performing.

Among other movers, Intel (NASDAQ:) gained after signing Amazon.com (NASDAQ:)’s cloud-services unit as a customer to make custom artificial-intelligence chips. Amazon.com shares also advanced.