Stock market today: Dow drops, S&P 500 and Nasdaq slip from records as Wall Street counts down to Fed decision

US equities experienced minor pullbacks from record highs on Tuesday as investors anticipated a widely expected 25 basis point Federal Reserve rate cut following its policy meeting. This occurred amidst robust August retail sales, which rose 0.6% against a 0.2% forecast, signaling resilient consumer spending. Notable corporate movements included Oracle's gain on reports of its role in a US-China TikTok deal, Warner Bros. Discovery's significant drop post-analyst downgrades, and Novo Nordisk's advance on obesity drug development. Meanwhile, oil prices climbed due to supply concerns and rate cut expectations, and gold reached new highs.

Analysis

U.S. equity markets experienced a minor pullback from record levels, with the S&P 500 and Nasdaq each slipping approximately 0.1% as investors positioned for the Federal Reserve's policy decision. A 25-basis-point interest rate cut is widely anticipated, with traders pricing in 96% odds. This monetary policy outlook is set against a backdrop of resilient consumer activity, evidenced by August retail sales rising 0.6%, triple the 0.2% forecast. In company-specific developments, Oracle (ORCL) shares gained nearly 3% on reports of its inclusion in a US-China deal to secure TikTok's U.S. operations. Conversely, Warner Bros. Discovery (WBD) plummeted 8% following analyst downgrades that cited the speculative nature of its recent 50% rally, which was triggered by an unconfirmed takeover report. Hims & Hers (HIMS) also faced significant selling pressure, dropping 7% after the FDA issued a warning letter over misleading claims, compounding existing reputational concerns and its status as a heavily shorted stock with 30% of its float sold short. Elsewhere, commodity markets were active, with oil prices rising 1% on Ukrainian attacks against Russian energy infrastructure and gold (GC=F) climbing to a new record above $3,700 per ounce ahead of the expected rate cut.

Key Decisions for Investors

• Investors should view the recent rally in Warner Bros. Discovery (WBD) with caution, as its 8% decline following analyst downgrades underscores the significant downside risk tied to its dependence on an unsubstantiated takeover bid.
• The FDA warning letter and high short interest in Hims & Hers (HIMS) signal elevated regulatory and reputational risks, warranting a reassessment of exposure to the stock given the potential for further volatility.
• The pending finalization of the US-China TikTok agreement represents a significant near-term catalyst for Oracle (ORCL), and its outcome should be closely monitored as it directly impacts the company's strategic position and potential revenue from the deal.
• Ralph Lauren's (RL) disappointing three-year outlook for mid-single-digit revenue growth, a deceleration from its recent 6.8% annual growth, suggests investors should temper expectations for the company's long-term performance amidst macroeconomic pressures.