Wall Street Rallies as Tech Stocks Surge Ahead of Fed Decision

Major U.S. indexes opened higher on Tuesday, with the S&P 500 and Nasdaq 100 gaining 0.5% and 0.8% respectively, while the Dow Jones Industrial Average added 0.3% and reached a new record high. The rally was driven by a surge in technology stocks, as investors positioned themselves ahead of the highly anticipated Federal Reserve decision on interest rates, expected to be announced on Wednesday.

Navigating the Shifting Tides of the Market

Tech Stocks Lead the Charge

The technology sector was the standout performer on Tuesday, with large-cap tech stocks leading the way. Microsoft (MSFT) gained more than 2% after the company announced a $60 billion stock buyback program and increased its dividend. Other tech giants, including Nvidia (NVDA), Amazon (AMZN), Meta Platforms (META), Alphabet (GOOGL), and Broadcom (AVGO), also saw their shares rise, while Apple (AAPL) was the lone holdout, dipping slightly.The surge in tech stocks was a welcome respite for investors, as the sector had been weighed down by losses on Monday. The Nasdaq, which had closed higher every day last week, lost ground on Monday, dragged down by the tech sell-off.

Intel's Restructuring Efforts Boost Dow

The big mover on the Dow Jones Industrial Average was Intel (INTC), which gained more than 2% after CEO Pat Gelsinger provided an update on the company's restructuring efforts. Gelsinger cited progress on cost-cutting measures and unveiled plans to turn Intel's chipmaking arm into a separate subsidiary. The company also announced that it would produce chips for Amazon and the U.S. military, further bolstering investor confidence.

Anticipation Builds Ahead of Fed Decision

Investors are eagerly awaiting the Federal Reserve's decision on interest rates, which is set to be announced on Wednesday afternoon. Market expectations have grown that the central bank could cut its influential fed funds rate by half a percentage point, as inflation has moderated and the labor market has weakened.As of Tuesday morning, traders were pricing in about a 65% chance of a half-percentage-point reduction in the benchmark rate, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data. This represents a significant shift from just a week ago, when the probability of a half-point cut was around 30%.The lack of market consensus heading into a Fed meeting is unusual, as the central bank typically doesn't adjust rates by more than a quarter point. Some analysts argue that a half-point cut could send the signal that the Fed sees the possibility of a significant deterioration of the economy, while others believe that a larger cut is warranted, arguing that the Fed has waited too long to begin easing policy.

Yields and Commodities React to Market Expectations

The yield on 10-year Treasurys, which is closely correlated to expectations around interest rates, was up slightly to 3.63% after falling to its lowest level in more than a year at just below 3.60% early Tuesday. This reflects the market's anticipation of a potential rate cut by the Fed.In the commodities market, gold futures were down slightly at around $2,600 an ounce, after hitting a new record high on Monday. Meanwhile, Bitcoin rose more than 1% to around $59,000, continuing its recent upward trend.As investors navigate the shifting tides of the market, the upcoming Fed decision will undoubtedly be a key factor in shaping the direction of the economy and financial markets in the weeks and months ahead.