Dow up 229 ahead of eagerly awaited Fed news
Stocks powered higher Tuesday, the Dow leaping 229 points, as Wall Street rallied ahead of the Federal Reserve meeting on interest rates Thursday.
The Dow Jones industrial average gained 1.4%. The Standard & Poor's 500 jumped 1.3% and the Nasdaq composite rose 1.1%.
The rally was broad-based as all 10 S&P sectors were higher and 29 of the 30 stocks in the Dow posted gains. The lone losing Dow stock: Disney (DIS), down 0.7%. Industrials, financials and the health care sector were leading the gains.
With the market and investors divided on the question of whether the Fed will hike short-term rates for the first time in nearly a decade at the end of their two-day meeting, which starts Wednesday, traders are still on edge as they wait to find out what the Fed decides to do when the policy statement is released at 2 p.m. ET Thursday.
In the mean time, Wall Street was digesting fresh economic data released Tuesday as they pondered the future of interest rates:
• Retail sales grew at a 0.2% pace in August, and sales in both July and June were revised higher, prompting Capital Economics to note that the data "shows consumer strength." Excluding volatile autos and gasoline, sales advanced 0.3%.
Retail sales rose modestly in August
• Manufacturing in the New York state region, however, came in weak again in September, with a reading of -14.7, following a similar-size plunge in August.
• Industrial production dropped 0.4% in August as factory output suffered with manufacturing production falling 0.5%, the biggest decline since January 2014. A drop in auto output contributed to the manufacturing weakness.
• Business inventories edged up slightly, rising 0.1% in July and sales bumped up 0.1% after a 0.3% rise in June.
Investors around the globe were trading cautiously. In Asia, shares in Japan's Nikkei 225 rose 0.3%, but stocks were down 0.5% in Hong Kong and 3.5% in mainland China's Shanghai composite index. European markets followed Wall Street higher in late trading. London's FTSE 100 was up 0.9%, Germany's DAX gained 0.6% and the CAC 40 in Paris rose 1.1%.
Wall Street is bracing for the Fed's decision. Until then all investors can do is watch, wait and play the Wall Street parlor game: Will they or won't they?
Bank investors watch Fed with bated breath
Lindsey Piegza, chief economist at Stifel, says the Fed meeting has much wider appeal than folks realize.
"Forget the Super Bowl or the Presidential election," she says. "This week's Fed meeting is arguably the most widely anticipated event in the aftermath of the Great Recession."
The suspense is building. Futures markets say the odds of a September rate hike, which would be the Fed's first since 2006, has tumbled to 23% recently, down from around 45%, on the belief that the global market tumult in recent weeks and China's economic slowdown will offset the good things happening in the U.S. economy and job market.
Wall Street history says stocks can survive Fed rate hike
The Fed, led by chair Janet Yellen, has been saying the decision will be data-dependent. But Fed officials have also noted that they are concerned about market stability.
Wall Street will have to wait until Thursday to find out if the Fed hike is a go or not.
"Until then," says Josh Selway of Schaeffer's Investment Research, "investors will search for clues as to whether Yellen & Co. will raise interest rates for the first time in nearly a decade."