The three major indices closed lower on Tuesday as investors cautiously awaited the Federal Reserve's interest rate decision

Zhitong
2025.09.16 23:47
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On Tuesday, the U.S. stock market closed lower amid volatile trading, as investors remained cautious ahead of the Federal Reserve's upcoming interest rate decision. The market widely expects the Federal Reserve to cut rates by 25 basis points. Although retail sales in August exceeded expectations, analysts believe this is not enough to change the rate cut outlook. All three major indices fell, with the Dow Jones Industrial Average down 0.27%, the S&P 500 down 0.13%, and the Nasdaq Composite down 0.07%. Market panic sentiment intensified, with the CBOE Volatility Index rising to 16.04. In individual stocks, UnitedHealth fell 2.3%, NVIDIA dropped 1.6%, and Webtoon Entertainment's stock surged 39%

According to the Zhitong Finance APP, on Tuesday, the U.S. stock market closed lower amid volatile trading, as investors remained cautious ahead of the Federal Reserve's upcoming interest rate decision, waiting for clearer market direction. The market widely expects that the Federal Reserve will announce a 25 basis point rate cut at the end of its two-day meeting to address recent signs of a weakening U.S. labor market.

Latest data shows that U.S. retail sales in August grew more than expected, indicating that consumer demand remains resilient. However, analysts believe this is not enough to change expectations for a rate cut by the Federal Reserve. Ross Mayfield, an investment strategist at Baird Private Wealth Management, stated, "Any resilient economic data will only reinforce the hawkish views within the FOMC and may even provide Federal Reserve Chairman Powell with reasons to adopt a more hawkish stance than the market expects during the press conference."

In addition to economic data, political news also failed to boost market sentiment. The Senate confirmed White House economic advisor Milan as a Federal Reserve governor on Tuesday. Meanwhile, an appeals court rejected President Trump's appeal to dismiss Federal Reserve governor Cook.

All three major indices closed lower, with the Dow Jones Industrial Average falling 125.55 points, or 0.27%, to close at 45,757.90 points; the S&P 500 index dropped 8.52 points, or 0.13%, to close at 6,606.76 points; and the Nasdaq Composite Index decreased by 14.79 points, or 0.07%, to close at 22,333.96 points. Among the 11 sectors of the S&P 500, six sectors closed lower, with the utilities and real estate sectors leading the declines, down 1.81% and 0.66%, respectively. Market panic sentiment has increased, with the CBOE Volatility Index (VIX) rising to its highest level in over a week at 16.04.

In individual stocks, UnitedHealth (UNH.US) fell 2.3%, becoming the biggest drag on the Dow. NVIDIA (NVDA.US) shares dropped 1.6% due to reports from foreign media indicating weak demand for its latest AI chips in the Chinese market. On the other hand, Webtoon Entertainment (WBTN.US) shares soared 39% after the company announced a partnership with Disney (DIS.US) to launch a new digital comic platform covering popular IP content such as Marvel and Star Wars. Oracle (ORCL.US) shares rose 1.5%, benefiting from Trump's announcement of an agreement for TikTok's U.S. operations with China. Multiple media outlets reported that Oracle will be one of the members of the investment consortium participating in TikTok's U.S. business control.

Despite the decline on Tuesday, the S&P 500 and Nasdaq both reached intraday and closing all-time highs on Monday. It is noteworthy that September is typically seen as a weak month for U.S. stocks, but all three major indices have recorded gains so far this month. On Tuesday, the total trading volume of U.S. stocks was 17.11 billion shares, higher than the average of 16.31 billion shares over the past 20 trading days.

Against the backdrop of widespread bets on an imminent rate cut by the Federal Reserve, the average interest rate for a 30-year fixed mortgage in the U.S. fell sharply by 12 basis points to 6.13% on Tuesday, the lowest level since the end of 2022. Matthew Graham, COO of Mortgage News Daily, stated that the current market situation is similar to September 2024, when the market reacted in advance to the almost certain expectation of a rate cut, but after the announcement of the rate cut, mortgage rates unexpectedly rose This situation may repeat itself.

Willy Walker, CEO of Walker & Dunlop, pointed out in an interview that looking at the nine rounds of interest rate cuts since 1980, only during economic recessions do rate cuts significantly lower long-term interest rates; and currently, we are not in a recessionary environment. Therefore, even if the Federal Reserve cuts rates by 25 basis points this time and in the future, the impact on long-term interest rates will be limited. Walker predicts that after the Federal Reserve announces a rate cut, the yield on 10-year U.S. Treasury bonds may rise slightly, and the market may exhibit a typical "buy the rumor, sell the news" trend

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