US open: Dow, S&P 500 hit new highs ahead of Fed decision

US stocks rose on Tuesday morning with the Dow and S&P 500 both at all-time highs ahead of a widely anticipated interest-rate cut from the Federal Reserve.

Helping sentiment in early deals was US economic data showing an unexpected rise in retail sales and a bigger-than-expected increase in industrial production.

By 1049 in New York, the Dow was up 0.45% at 41,809.68, topping Monday's record close of 41,622.08, while the S&P 500 was rising 0.64% to 5,669.40, edging past the 5,667.20 closing high reached in mid-July.

The Nasdaq, meanwhile, jumped nearly 1% to 17,763, though remains firmly below its all-time record of 18,647.45 hit on 10 July.

Fed in focus

A 25-basis point (bp) reduction in the Federal Funds Rate is priced into markets already, ahead of the conclusion of the Fed policy meeting at 1400 ET Wednesday, though investors are uncertain whether the central bank will go ahead with a 50bp cut in light of worsening economic conditions in recent months.

In economic data, US retail sales rose in August, though growth was only minor suggesting that consumers remained cautious about spending in light of tough economic conditions. According to the US Census Bureau, advance retail and food services sales rose to $710.8bn last month, up 0.1% from July.

That was down from an upwardly revised 1.1% monthly gain in July (0.1 percentage points higher than the initial estimate), which was the highest rate of growth seen since early 2023. However, it was still better than the 0.2% decline expected by economists.

"On its own, [the retail sales data] supports a smaller 25bps cut rather than 50bps, but it will more likely be the state of the US labour market and the Fed’s perception of the risk of a deterioration that will drive that decision tomorrow," said Ryan Brandham, head of Global Capital Markets, North America, at Validus Risk Management.

In other news, US industrial production expanded by 0.8% in August, following a 0.6% fall the month before, coming in ahead of the 0.2% growth expected. The NAHB/Wells Fargo Housing Market Index was also released, rising to two points to 41 in September, beating the 40-point forecast.

Market movers

Intel shares were surging on the back of news that it is demerging its foundry business, expanding its partnership with Amazon's cloud division, and receiving $3bn in federal grants to make chips for the Pentagon.

Microsoft was also on the up after unveiling plans to buy back $60bn of stock as it lifted its quarterly dividend by 11%

Broker comments were also helping others in the tech sector, such as Dell which received a boost from Mizuho Securities which started coverage of the stock with an 'outperform' rating, while Shopify was upgraded from 'neutral' to 'buy' by Redburn Atlantic.