Nasdaq 100: Markets Rally as Microsoft Dividend Boost and Fed Outlook Fuel Optimism

Stock Futures Rise as Markets Await Fed Decision and Retail Sales Data

Stock futures edged higher on Tuesday as investors prepared for key U.S. retail sales data and the Federal Reserve’s September policy meeting. Markets are closely watching how the central bank will approach interest rates amid concerns over inflation and economic growth.

At 11:50 GMT, Dow Futures are trading 42133.00, up 76.00 or +0.18%. S&P 500 Index Futures are at 5713.50, up 14.25 or +0.25% and Nasdaq Futures are trading 19750.25, up 85.00 or +0.43%.

Microsoft Boosts Dividend, Intel Gains on New Plans

Shares of Microsoft rose 2% in premarket trading following the announcement of a 10.7% increase in its quarterly dividend, raising it to $0.83 per share. The company also authorized a $60 billion stock buyback program, signaling confidence in its financial health.

Meanwhile, Intel shares surged approximately 7% after revealing plans to make its foundry business a subsidiary. This move comes as the Biden administration awarded Intel up to $3 billion in funding under the Chips Act, aiming to boost domestic semiconductor production. Investors responded positively to the news, viewing it as a strategic step to capitalize on increasing demand for U.S.-made chips.

Retail Sales Data in Focus Ahead of Fed Meeting

Investors are closely watching the August retail sales report, which could provide a critical look at the state of U.S. consumer spending ahead of the Federal Reserve’s policy decision. Economists surveyed by Dow Jones expect a 0.2% decline in retail sales, with a slight gain of 0.2% excluding auto sales. The data could play a crucial role in influencing the Fed’s decision on whether to adjust interest rates.

With inflation pressures persisting and borrowing costs elevated, Wall Street is anticipating a potential rate cut, which could provide some relief to corporate earnings. The Fed has been steadily increasing rates since March 2022, but many traders believe that the central bank may finally ease its aggressive stance.

Markets Split on the Size of Fed Rate Cut

Wall Street is divided on the magnitude of the upcoming rate cut. According to the CME Group’s FedWatch tool, there is a 67% probability of a 50 basis point reduction, up from 47% last week. However, economists surveyed by CNBC lean toward a more cautious move, with 84% predicting a 25 basis point cut.

Seema Shah, chief global strategist at Principal Asset Management, commented on the uncertainty, noting that “conflicting signals of solid economic activity but a weakening labor market” make the decision more challenging. Shah believes the Fed should adopt a conservative approach, cutting by 25 basis points and possibly following up with additional reductions in November and December.

Stock Market Faces Continued Challenges

Despite Tuesday’s optimism, some analysts foresee ongoing struggles for the stock market. Austin Pickle, an investment strategy analyst at Wells Fargo, highlighted the possibility of further stock market declines, pointing to a pattern of late-summer sell-offs in recent years. He cited simmering economic concerns, geopolitical risks, and doubts surrounding the near-term prospects of artificial intelligence as factors that may weigh on the market.

Market Forecast: Cautious Outlook Amid Fed Uncertainty

As investors await the Fed’s decision, the stock market outlook remains cautious. While a 25 basis point cut seems more likely, the possibility of a larger cut cannot be ruled out. Market volatility may persist, particularly as concerns over global economic conditions and inflation continue to dominate investor sentiment. Traders should brace for potential short-term turbulence as the Fed’s policy stance becomes clearer later this week.

Technically, E-mini Nasdaq-100 Index futures are set to open today’s cash session on the strong side of the 50-day moving average at 19632.28. A sustained move over this level could generate the upside momentum needed to challenge the recent top at 20257.50.  While a break back below the indicator sets up the possibility of a retest of the 200-day moving average at 18873.12 over the near-term.