To The Moon

Major U.S. equities indexes finished little changed on the final trading day before the Federal Reserve's eagerly awaited interest-rate decision, with questions lingering about the magnitude of a likely rate cut.

The S&P 500 eked out a gain of less than 0.1% on Tuesday, extending its streak of positive trading sessions to seven. The Nasdaq was up 0.2%, while the Dow lost ground in the afternoon to close with a loss of less than 0.1%.

Positive price action in Microsoft (MSFT) also provided some support to the broader market after news of a 10% increase to its quarterly dividend and a share buyback authorization up to $60 billion.

Market participants were digesting some relatively pleasing economic data, which supported the soft landing narrative and did not change the market's rate cut expectations that much. Retail sales and industrial production were both stronger than expected in August.

According to the CME FedWatch Tool, the likelihood of a 50 basis points rate cut tomorrow sits at 63.0%, up from 34.0% one week ago.

The market's optimistic view on the economy and rate cuts contributed to an overall positive bias, and to the outperformance of small-cap stocks and cyclical sectors.

Energy Sector Came Up Top from Previous Second

The Russell 2000 climbed 0.7%, and the S&P 500 energy (+1.41%), industrials (+0.55%), financial (+0.53%), and consumer discretionary (+0.51%) sectors showed relative strength.

Countercyclical sectors underperformed the index. Health care (-1.03%) and consumer staples (-0.95%) sectors were the worst performers today.

Six sectors closed in the positive as investors expressed uncertainty over the size of the Federal Reserve's expected rate cut.

Energy was the only sector with more than 1% to become top performing sector with +1.41%, consumer discretionary sector was second with +0.62%. Energy came in top despite WTI crude oil futures settled 0.1% lower at $69.89/mmbtu.

Note Yield ended Lower

The 10-year yield settled fourteen basis points lower at 3.645%, and the 2-year yield settled two basis points higher at 3.613%.

Stocks To Watch

Shares of business IT provider $Hewlett Packard Enterprise(HPE)$ jumped 5.6% after Bank of America upgraded the stock to "buy." Analysts cited numerous catalysts for the company, including increased demand for AI products. The team also believes Hewlett Packard Enterprise can cut costs under its new chief financial officer (CFO) while generating revenue and synergies through its intended acquisition of Juniper Networks (JNPR).

If we looked at HPE on MTF, it looked like HPE rise might be short lived as it has just crossed the long term MA, but still below short term MA, so we might see some adjustment in coming weeks.

Intel stock (INTC) popped after its foundry secured Amazon (AMZN) as a multibillion-dollar customer for AI chips. Also helping revive faith in battered tech stocks was Microsoft's (MSFT) new plan to buy back up to $60 billion in shares and a 10% boost to its dividend.

Nvidia (NVDA) is in discussions to acquire software startup OctoAI. The chipmaker has offered roughly $165M for the Seattle-based startup, which sells software for customers to use and make their artificial intelligence models run more efficiently. Nvidia shares fell 1.4% in late afternoon trading on Tuesday.

Rising prices and an uncertain economic situation have increasingly forced consumers to turn to credit cards to make ends meet. At the same time, the interest rates for these purchases have soared to new highs. As a result of these macro factors, many of the industry's biggest players have drawn significant attention from investors. This has been a boon for shares of credit card giants American Express (AXP, Financial), $Visa(V)$ ,and $MasterCard(MA)$ , which have drifted higher through 2024 and have set new 52-week highs. The upward momentum has come as consumers become even more reliant on credit cards. A study issued by the Federal Reserve Bank of New York showed that credit card debt jumped to $1.14T in Q2, or about $6,500 per person. This was up 10.8% from last year. Meanwhile, the cost of carrying credit card debt has jumped dramatically.

Visa is showing a strong upward trend from MTF, as there have been a very nice upside as V is trading above both the short-term and long-term MA.

I would think this is one of the financial stocks that will do well when we see confirmed rate cut.

Similar to Visa, Mastercard is enjoying very nice upside from the MTF, and we could be seeing more upward trend as we await the rate cut from Fed today (18 Sep).

This also created an opportunity to look at $Financial Select Sector SPDR Fund(XLF)$ if you wanted to take advantage of the rise once rate cut stepped in.

From the MTF, XLF is having strong upward trend moving forward, and we should be expecting this to move even higher after the FOMC meeting today (18 Sep).

Using RRG indicator, we are seeing that Visa, Mastercard and XLF all have moved from improving quadrant to leading quadrant, this shows that there is strong relative strength while positioned in the leading quadrant indicate sustained market leadership and potential for continued outperformance.

Summary

We could be seeing market exhibiting slow trading action, as investors might take time to comprehend the FOMC decision, but we should be seeing some sectors which is poised to benefit from the rate cut, regardless of how much it is.

But we need to manage expectations if the rate cut is 25 basis points which is lower than the highly anticipated of 50 basis point.

I would be monitoring cautiously and take advantage by trading some ETFs.

Appreciate if you could share your thoughts in the comment section whether you think market would be picking up the trading activity after the FOMC rate cut decision?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.