S&P 500 eases from record as traders wait for big Fed rate decision

S&P 500 eases from record as traders wait for big Fed rate decision

The S&P 500 slipped on Tuesday as investors took a pause after a run of record highs and positioned themselves for the Federal Reserve’s closely watched policy decision later this week. Traders have largely priced in a 25-basis-point cut at the Sept. 16–17 meeting, leaving markets to parse how Chair Jerome Powell frames the move and whether the Fed signals a path for further easing. 

Stocks retreated modestly in choppy trading, with the S&P down roughly 0.1% and the Nasdaq and Dow also showing small losses as risk appetite cooled. The pullback followed a stretch of fresh highs for U.S. indices, and market participants said the real test would come when the Fed’s statement and Powell’s press conference give guidance on the likely sequencing of future rate cuts. 

Part of the nervousness reflected moves in fixed income: U.S. Treasury yields eased in the run-up to the decision, with the 10-year yield drifting into the low-4% area — a decline that both underpins higher equity valuations for long-duration growth names and focuses attention on how much room the Fed will leave for subsequent policy easing. That dynamic has left sector performance bifurcated, with traditionally rate-sensitive areas such as utilities and real estate among the weaker performers while cyclicals and commodity-linked names showed pockets of strength. 

Safe-haven flows were visible elsewhere: the dollar weakened and gold climbed as investors sought protection against possible market volatility around the Fed event. Oil and other commodities were also watched closely for any geopolitical or supply developments that might complicate the Fed’s assessment of inflation risks. 

Analysts and traders said the immediate market reaction will come down to nuance rather than surprise. A cautiously worded cut that stresses data dependence could see the rally lose momentum, while language that opens the door to a steady sequence of cuts would probably reinvigorate investors’ appetite for growth stocks and extend the rally that pushed benchmarks to repeated record closes earlier this month. For now, markets remained in a holding pattern — up against lofty valuations but sensitive to the Fed’s next sentences.