Wall Street rises ahead of key US central bank decision

Wall Street’s main indexes have risen, with the benchmark S&P 500 close to its intraday record high, as investors awaited a crucial Federal Reserve policy decision and fresh economic data allayed worries of a sharp slowdown in the US economy.

A Commerce Department report showed retail sales rose unexpectedly in August, as a decline in receipts at auto dealerships was offset by strength in online purchases, suggesting the economy was on solid footing through much of the third quarter.

Rate-sensitive growth stocks such as Alphabet and Tesla added 1.0 per cent and 1.90 per cent while Nvidia edged up 0.44 per cent, pushing the broader chips index higher 0.60 per cent.

Microsoft boosted the S&P 500 with a 2.3 per cent rise on the day after the AI-frontrunner’s board approved a new $US60-billion ($A89 billion) share buyback program and hiked its quarterly dividend by 10 per cent.

The broader tech sector climbed 0.70 per cent.

In early trading on Tuesday, the Dow Jones Industrial Average rose 78.70 points, or 0.19 per cent, to 41,706.55, the S&P 500 gained 21.50 points, or 0.38 per cent, to 5,654.59 and the Nasdaq Composite gained 126.91 points, or 0.72 per cent, to 17,719.03.

The blue-chip Dow traded at a record high and the Russell 2000 index tracking small caps - which tend to perform better in a low-interest-rate environment - advanced 0.71 per cent.

Seven of the 11 S&P 500 sectors traded higher, led by a 1.0 per cent rise in consumer discretionary stocks.

With Fed officials scheduled to commence their two-day meeting, traders are betting on a 65 per cent probability the world’s most influential central bank will decide to lower borrowing costs by a bigger 50 basis points, according to the CME Group’s FedWatch Tool.

Odds favouring a smaller 25-bps reduction stand at 35 per cent from 66 per cent a week earlier as investors focused on remarks from a former policymaker supporting an outsized move and signs of a cooling labour market, among other indicators.

“Retail sales being higher is suggestive that the economy is modestly better,” said Michael Green, chief strategist and portfolio manager at Simplify Asset Management.

“I would say that the actual underlying data is relatively mixed and markets are in a bit of a holding pattern, waiting for (chair Jerome) Powell and the Federal Reserve tomorrow.”

September has historically been weak for US equities, with the benchmark S&P 500 down about 1.20 per cent for the month on an average since 1928.

However, factoring in the day’s gains, the index is up about 0.20 per cent so far this September.

Still, a survey of BofA fund managers showed global investor sentiment improved in September 2024 for the first time since June on optimism around a soft landing and rate cuts by the US central bank.

Among other movers, Intel rose 2.3 per cent after signing Amazon.com’s cloud services unit as a customer to make custom artificial-intelligence chips.

Amazon.com gained 2.0 per cent.

Viasat dropped 6.1 per cent after brokerage JPMorgan downgraded it to “neutral” from “overweight”.

Advancing issues outnumbered decliners by a 2.93-to-1 ratio on the NYSE and by a 2.32-to-1 ratio on the Nasdaq.

The S&P 500 posted 30 new 52-week highs and no new lows while the Nasdaq Composite recorded 62 new highs and 27 new lows.