Stocks close mixed as investors brace for a major Fed rate decision

• Indexes were mixed on Tuesday after the S&P 500 hit a fresh intraday high.

• Investors await the Federal Reserve’s interest rate decision on Wednesday.

• Tuesday’s retail sales data boosted prospects for a soft landing.

Indices were mixed on Tuesday, with investors still divided over the potential size of an interest rate cut with less than 24 hours until the Federal Reserve announces its policy decision.

The unexpected strength of Tuesday’s retail sales data convinced investors that the economy remains robust, and the S&P 500 briefly hit a record high before paring gains. Risk assets also gained, with bitcoin posting its biggest intraday jump in more than a month.

According to the CME FedWatch tool, investors have a 65% chance the Fed will offer a half-point rate cut at 2 p.m. Wednesday.

Bond yields rose ahead of the Fed’s decision, nodding to the possibility that the chances of a jumbo interest rate cut may be fading after retail sales surprised higher. The 10-year Treasury yield rose two basis points to 3.646%.

Strong retail sales suggest the Fed may not be in a rush to cut further, as the consumer economy appears intact for now. But in recent months, earlier data — particularly labor force data — also suggested a slowdown.

“The Fed is facing mixed signals as they debate how much to cut rates,” LPL Financial chief economist Jeffrey Roach said. “Consumer spending is rising despite early signs of labor market weakness, so the Fed may be behind the curve again if it relies too much on outdated data and not enough on forward-looking outlooks.”

Here’s where US indices stood at the closing bell at 4pm on Tuesday:

Here’s what else is going on:

In commodities, bonds and crypto:

• WTI crude rose 1.81% to $71.36 a barrel. Brent crude, the international benchmark, rose 1.51% to $73.84 a barrel.

• Gold fell 0.54% to $2,594.8 an ounce.

• The 10-year Treasury yield rose two basis points to 3.646%.

• Bitcoin rose 3.63% to $60,038.

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