The performance of the index tracking the largest 500 U.S. companies by market capitalization was in line with other major indices. The Invesco QQQ Trust, Series 1 QQQ, which tracks the tech-heavy Nasdaq, and the SPDR Dow Jones Industrial Average ETF DIA both closed broadly flat for the day.

However, small-cap stocks outperformed their larger counterparts, as the iShares Russell 2000 ETF IWM finished 0.8% higher.

Policymakers gathered on Tuesday for the two-day Federal Open Market Committee (FOMC) meeting, with the interest rate decision expected on Wednesday at 2:00 p.m. ET.

Market expectations are mixed, with CME FedWatch data indicating a 65% chance of a 50-basis-point rate cut and a 35% chance of a smaller 25-basis-point cut. This level of uncertainty is unusual on the eve of a Fed decision.

Expectations for a larger rate cut fell slightly after August retail sales came in stronger than anticipated. Retail sales increased by 0.1% month-over-month, decelerating from July’s robust 1.1% growth but beating forecasts of a 0.2% decline.

The unexpected strength in consumer spending has cast some doubt on the need for a significant rate cut to support the economy.

An overwhelming consensus among Wall Street analysts anticipates a 25-basis-point cut, yet JPMorgan Chase stands among the outliers predicting a 50-basis-point reduction.

Tuesday’s Top 5 S&P 500 Stocks

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Image created using artificial intelligence via Dall-E.