Small Caps, Bitcoin Rally As Traders Await Fed Rate Cut; Treasury Yields, US Dollar Tick Up On Strong Retail Sales: What’s Driving Markets Tuesday? – SPDR Dow Jones Industrial Average ETF (ARCA:DIA)

Wall Street experienced a slightly positive session Tuesday, supported by investor optimism as the Federal Open Market Committee (FOMC) kicked off its two-day meeting, expected to deliver the first interest rate cut in over four years on Wednesday.

The session’s notable performers were small caps, with the Russell 2000 index surging about 1.3%, targeting its highest close since early August and outperforming larger-cap indices.

Among industries, solar, clean energy and regional banks led gains as traders eyed pockets of the markets that would benefit from lower interest rates.

On the macro front, August retail sales provided an upside surprise, growing by 0.1% month-over-month compared to the expected 0.2% decline. This stronger-than-anticipated data slightly reduced the likelihood of a more aggressive 50-basis-point rate cut, with market-implied probabilities for such a move slipping from 67% to 63%, according to the CME FedWatch Tool.

Short-dated Treasury yields rose as expectations for a substantial rate cut moderated. Meanwhile, the dollar strengthened, gaining 0.2%.

In the commodities market, gold retreated 0.7% from Monday’s record-high close. Oil prices increased by 1.3% following escalating geopolitical tensions in the Middle East.

Reports indicate a coordinated attack in Lebanon led to thousands of pagers linked to Hezbollah militants being detonated, resulting in numerous casualties within the Iran-backed organization.

Additionally, Iran’s ambassador to Lebanon is reportedly injured, though the official responsibility for the attack remains unclaimed.

Bitcoin BTC/USD jumped over 4%, buoyed by positive ETF inflows, signaling renewed investor interest in the digital asset space as interest rates shift.

According to Benzinga Pro platform:

• The SPDR S&P 500 ETF Trust SPY was 0.1% higher to $563.44.
• The SPDR Dow Jones Industrial Average DIA inched 0.1% up to $417.61.
• The tech-heavy Invesco QQQ Trust Series QQQ also rose 0.1% to $473.60.
• The iShares Russell 2000 ETF IWM rose 1.2% to $220.28.
• The Energy Select Sector SPDR Fund XLE outperformed, up 1.2%. The Health Care Select Sector SPDR Fund XLV lagged, down 0.9%.

• Moderna Inc. MRNA surged over 6% after receiving approval from Health Canada for its updated SPIKEVAX COVID-19 vaccine, designed to target the KP.2 sub-lineage of SARS-CoV-2 in individuals aged six months and older.
• GE Vernova Inc. GEV climbed 3.5% following an upgrade from Bank of America, which raised its rating on the stock from Neutral to Buy and increased the price target from $200 to $300.
• Hewlett Packard Enterprise Co HPE advanced nearly 5% after Bank of America also upgraded its rating from Neutral to Buy and boosted the price target from $21 to $24.

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The image was created using artificial intelligence MidJourney.