Rate Cut Bets Edge Higher Ahead of the FOMC – US Market Wrap

Wall Street traders gearing up for this week’s Federal Reserve decision kept driving a rotation out of the tech megacaps that have powered the bull market in stocks.

As bets on a half-point Fed cut on Wednesday kept growing, money continued to flow into economically sensitive corners of the market. While the S&P 500 edged only mildly higher – most of its shares were up. The gauge’s equal-weighted version – one that gives Target Corp. as much clout as Microsoft Corp. – hit a record high on hopes the rally will broaden out.

In the run-up to the Fed decision, strategists from Morgan Stanley to Goldman Sachs and JPMorgan are saying that the size of the reduction is less relevant for stocks than the health of the US economy.

The S&P 500 rose 0.1%. Its equal-weighted version added 0.7%. The Nasdaq 100 slid 0.5%. The Dow Jones Industrial Average gained 0.6%. A Magnificent Seven gauge of megacaps slipped 0.7%. The Russell 2000 of small firms added 0.3%.

Banks outperformed the broader market on bets a soft economic landing would trump margin pressures. Apple led losses in big tech as a closely followed analyst warned demand for the iPhone 16 Pro has been lower than expected.

Treasury 10-year yields declined three basis points to 3.62%. The dollar fell to the lowest since January. Gold hit an all-time high.