Stock market today: S&P 500 retreats from record levels as Fed rate decision looms

Investing.com-- The S&P 500 closed lower after hitting a fresh intraday record Tuesday as investors looked ahead to a widely expected Federal Reserve rate cut due Wednesday. 

At 4:00 p.m. ET (20:00 GMT), the Dow Jones Industrial Average dropped 125 points, or 0.2%, while the S&P 500 index fell 0.1%, but had hit a record high of 6,626.76 While the {{14958|{14958|NASDAQ Composite}}} } fell 0.1%.

Both the S&P 500 and NASDAQ Composite notched all-time closing highs on Monday, with the former finishing above 6,600 for the first time, with Fed rate cut expectations driving much of this rally.

Retail sales rose strongly in August; Fed meeting kicks off

U.S. retail sales rose at a faster-than-anticipated pace in August, spurred on partially by demand at e-commerce retailers, although the prospect of a weakening labor market remains heading into the final weeks of the third quarter.

Month-on-month, retail sales in the world’s largest economy rose by 0.6%, matching July’s upwardly-revised growth and topping economists’ expectations for an uptick of 0.2%, according to data from the Commerce Department on Tuesday. Notably, retail sales consist mostly of goods and are not adjusted for inflation.

"The knee-jerk reaction is hawkish as the [...] figure points to healthy consumer spending trends," analysts at Vital Knowledge said in a note. But they said it is "not a huge surprise that the consumer is still spending" and "the Fed is focused on jobs."

The Federal Reserve kicks off its two-day meeting Tuesday, and is widely expected to decide to cut interest rates by 25 basis points on Wednesday. The rate decision will be accompanied by a fresh set of projections including on the rate cut outlook ahead, with many investors betting on three rate cuts this year. 

U.S.-China trade negotiations

Supporting risk appetite was a fresh wave of optimism surrounding the ongoing U.S.-China trade negotiations in Madrid.

President Donald Trump posted on Monday that the “big Trade Meeting in Europe … has gone VERY WELL!”

He added that “a deal was also reached on a ‘certain’ company that young people in our Country very much wanted to save. They will be very happy!” referring to TikTok.

Treasury Secretary Scott Bessent confirmed that a framework deal was reached for TikTok’s U.S. ownership, with a call between Trump and Chinese President Xi Jinping slated for Friday to finalize details.

Ford to cuts jobs in Germany

In the corporate sector, Ford (NYSE:F) announced plans to cut up to 1,000 jobs in electric car production in the German city of Cologne due to weak demand.

Google (NASDAQ:GOOGL) said on Tuesday it would make £5 billion ($6.80 billion) in new investments into Britain ahead of U.S. President Donald Trump’s state visit to the country, which is expected to feature a flurry of business deals and partnerships.

Elsewhere, Dave & Buster’s Entertainment (NASDAQ:PLAY) stock dropped sharply after the chain of restaurants and arcades posted disappointing quarterly earnings.

Rocket Lab (NASDAQ:RKLB) stock fell after the aerospace manufacturer announced it had entered into a stock purchase agreement worth up to $750 million, while health insurer Oscar Health (NYSE:OSCR) dropped after announcing a $350 million private offering of senior convertible notes.

Oracle (NYSE:ORCL) stock rose after CBS News reported that the cloud computing giant is among a consortium of firms that would enable TikTok to continue operations in the U.S. if a Sino-U.S. framework deal was reached.

Peter Nurse, Ayushman Ojha contributed to this article