Bitcoin Rally Boosts Small Caps While Traders Anticipate Fed Rate Cut; Treasury Yields and US Dollar Rise Amid Strong Retail Sales: Market Drivers on Tuesday – SPDR Dow Jones Industrial Average ETF (ARCA:DIA)
Wall Street saw a modestly positive day on Tuesday, driven by investor confidence as the Federal Open Market Committee (FOMC) commenced its two-day meeting, widely expected to announce the first interest rate cut in more than four years on Wednesday.
The standout performers during the session were small-cap stocks, with the Russell 2000 index surging approximately 1.3%, aiming for its highest close since early August and surpassing larger-cap indices.
In terms of sectors, solar, clean energy, and regional banks led the gains as traders identified areas of the market poised to benefit from lower interest rates.
On the macroeconomic front, August retail sales pleasantly surprised, showing a 0.1% month-over-month growth compared to the anticipated 0.2% decline. This stronger-than-expected data slightly reduced the chances of a more aggressive 50-basis-point rate cut, with market-implied probabilities for such a move decreasing from 67% to 63%, according to the CME FedWatch Tool.
Short-term Treasury yields rose as expectations for a substantial rate cut moderated, while the dollar strengthened, gaining 0.2%.
In the commodities market, gold retreated by 0.7% from its record-high close on Monday. Oil prices rose by 1.3% following escalating geopolitical tensions in the Middle East.
Reports indicated a coordinated attack in Lebanon that resulted in the detonation of thousands of pagers linked to Hezbollah militants, causing multiple casualties within the Iran-backed organization.
Additionally, Iran’s ambassador to Lebanon was reportedly injured, although no official claim of responsibility for the attack has been made.
Bitcoin BTC/USD surged over 4%, supported by positive ETF inflows, indicating a renewed interest from investors in the digital asset space amid shifting interest rates.
In major US indices and ETFs performance on Tuesday:
– Russell 2000: 2,220.44 (1.3% increase)
– S&P 500: 5,642.79 (0.2% increase)
– Nasdaq 100: 19,441.83 (0.1% increase)
– Dow Jones: 41,636.05 (0.0% change)
According to the Benzinga Pro platform:
– SPDR S&P 500 ETF Trust SPY rose by 0.1% to $563.44.
– SPDR Dow Jones Industrial Average DIA increased by 0.1% to $417.61.
– Invesco QQQ Trust Series QQQ also saw a 0.1% rise to $473.60.
– iShares Russell 2000 ETF IWM climbed 1.2% to $220.28.
– Energy Select Sector SPDR Fund XLE outperformed, rising by 1.2%, while Health Care Select Sector SPDR Fund XLV lagged, declining by 0.9%.
In the realm of stock movers on Tuesday:
– Moderna Inc. MRNA surged over 6% following Health Canada’s approval for its updated SPIKEVAX COVID-19 vaccine.
– GE Vernova Inc. GEV rose by 3.5% after receiving an upgrade from Bank of America.
– Hewlett Packard Enterprise Co HPE advanced nearly 5% after an upgrade and price target increase from Bank of America.
The day’s developments underscore a mix of market dynamics, economic indicators, and geopolitical events that influenced various asset classes and individual stocks.
