Tuesday's Markets: Dow Hits New Record as Retail Sales Rise

Dow Jones Hits Record, S&P Nears All-Time High

On Monday, the Dow Jones Industrial Average reached a new all-time high, advancing by 228.30 points, or 0.55%. This increase pushed the 30-stock index to new heights, while the S&P 500 was just shy of its own record, adding 0.13% to close at 5,633.09. In contrast, the Nasdaq Composite lost 0.52%, dragged down by a decline in chip stocks, including Nvidia (NASDAQ:NVDA).

Apple (NASDAQ:AAPL) shares took a significant hit, falling 2.8%. Analysts pointed to potentially lower-than-expected demand for the iPhone 16 Pro as the reason for the drop. The tech sector's performance has recently fluctuated as concerns about demand and supply chain issues weigh on investors' minds.

Premarket Movers:

Retail Sales Surprise with Unexpected August Growth

US retail sales posted a surprising rise in August, offering some relief to fears of an economic slowdown. According to the Census Bureau, retail sales edged up by 0.1% last month, following a stronger 1.1% gain in July. Economists had expected a 0.2% decline, so this minor increase was a welcome surprise.

While the sales figure is not adjusted for inflation and focuses primarily on goods, the modest uptick suggests that consumers are still spending. This comes at a critical time for the economy, as signs of weakening demand could prompt broader concerns.

Markets Brace for Major Fed Interest Rate Decision

The Federal Reserve's upcoming interest rate decision is top of mind for traders. Currently, the Fed's target interest rate is at a 23-year high, between 5.25% and 5.5%. Much of the focus is on whether the Fed will make a traditional 25-basis point cut or go further with a 50-basis point reduction.

According to the CME Group's FedWatch Tool, the odds of a 50-basis point cut this week have risen to 67%, driven by media speculation and influential voices like former New York Fed President Bill Dudley. Dudley has argued that current short-term rates are "far above" the neutral level needed to maintain economic stability.

This Fed decision will have major implications for the economy, with the latest retail sales data being one of the final key indicators that policymakers will consider. The Fed must also balance inflation concerns and a labor market showing signs of cooling. A larger-than-expected rate cut could help spur economic growth, but it may also raise questions about inflation control.

Intel's Foundry Business Restructuring Boosts Stock

After the market closed on Monday, Intel (NASDAQ:INTC) announced plans to spin off its foundry business into an independent unit.

This move is part of CEO Pat Gelsinger's strategy to revitalize the struggling chipmaker, which has lost nearly 60% of its stock value in 2024. Intel has invested around $25 billion in the foundry unit over the past two years, and by restructuring, the company hopes to attract external capital.

Intel also made headlines by striking a deal with Amazon to produce custom chips for artificial intelligence (AI). This partnership positions Intel as a key player in the AI race, where demand for advanced chips is growing rapidly. However, Intel did announce some setbacks, including a pause in operations in Poland and Germany. Fortunately for U.S. workers, the company's manufacturing projects in the U.S. remain unaffected.

The restructuring news has had a positive effect on Intel's stock, which surged in after-hours trading on Monday. This development signals a turning point for the company, as it looks to reinvent itself in an increasingly competitive chip industry.