Macro Overview
Wall Street drifted to a quiet, slightly lower close on Tuesday as investors adopted a wait-and-see approach ahead of Wednesday’s pivotal Federal Reserve interest rate decision. The S&P 500 (IVV) ticked down 0.13%, pausing just below its all-time high. A stronger-than-expected retail sales report earlier in the day showed continued consumer resilience but did little to alter the market’s conviction that the Fed will announce its first rate cut of the year. The session was marked by low volatility and a defensive rotation, indicating that traders are largely holding their positions as they await guidance from the central bank.
U.S. Size & Style
Performance across the size and style spectrum was uniformly negative on Tuesday, though losses were modest. Small-caps (IJR -0.12%) held up slightly better than their large-cap counterparts (IVV -0.13%), a minor departure from the recent trend. Growth stocks (IVW -0.22%) underperformed value stocks (IVE -0.07%) across the board as investors trimmed exposure to higher-beta names ahead of the Fed announcement. The muted and tightly clustered returns suggest a broad-based pause rather than a decisive shift in sentiment.
U.S. Sectors & Industries
The market saw a clear defensive rotation on Tuesday. Energy (+1.68%) was the standout winner, driven by a sharp rally in Oil & Gas Exploration & Production (XOP) which gained 3.15%. Consumer Discretionary (+0.61%) and Consumer Staples (+0.45%) also performed well. On the other hand, Utilities were the clear laggard, dropping 1.82%. Other cyclical sectors like Real Estate (-0.59%) and Industrials (-0.30%) also finished in the red, highlighting the cautious tone ahead of the Fed’s announcement.
Global Thematic
It was a day of sharp reversals in the thematic space. Cannabis stocks, which had been underperformers, staged a massive rebound, with the AdvisorShares Pure US Cannabis ETF (MSOS) soaring 6.78%. In contrast, Uranium and Precious Metals miners, the leaders from the previous session, saw significant profit-taking. The Sprott Junior Uranium Miners ETF (URNJ) plummeted 4.79%, and the Global X Silver Miners ETF (SIL) dropped 3.03%, highlighting the volatile, sentiment-driven nature of these industry groups.
Developed Markets ex-U.S.
International developed markets saw a slight pullback on Tuesday, with the broad EFA index declining 0.28%. South Korea (EWY) was a significant outperformer, surging 1.89% on the back of strength in its defense sector. However, most other regions finished in the red, with Hong Kong (EWH) being a notable laggard, down 1.09%. The cautious tone mirrored that of the U.S. market as investors awaited the Fed’s decision.
Emerging Markets
Emerging markets had a mixed but ultimately positive session, with the broad EEM index rising 0.74%. The Philippines (EPHE) and China (CHIQ) consumer discretionary sector were standout performers, both gaining nearly 2%. India (INDA) also had a strong showing, up 0.82%. However, the gains were tempered by weakness in some specific areas, particularly China’s healthcare sector (KURE, -1.38%) and Poland (EPOL, -0.91%).
Fixed Income
Fixed income markets were broadly negative as investors took a risk-off stance ahead of the Fed meeting. The higher-beta and longer-duration segments saw the largest declines, with Taxable High Yield (HYG) falling 0.07% and Emerging Market USD bonds (EMB) dropping 0.06%. In contrast, the safest short-term assets like Taxable Ultrashort bonds (BIL) managed to eke out a small gain of 0.01%, highlighting the defensive mood.
Commodities
The energy complex continued its rally on Tuesday, with WTI Crude Oil (USO) gaining 1.94% and Natural Gas (UNG) surging another 2.40%. However, the strength in energy was not enough to lift the broader commodity space, as most other areas saw declines. Precious metals were weak, with Silver (SLV) falling 0.41% and Palladium (PALL) dropping 1.88%. Agriculture (DBA) also pulled back by 0.54%, resulting in the broad-based commodity index (DJP) finishing down 0.79% for the day.
Cryptocurrency
The crypto market saw a risk-on rotation on Tuesday. Bitcoin (IBIT) gained 1.33%, while Solana (SOLZ) also climbed an impressive 2.16%. In a notable divergence, Ethereum (ETHA) finished the day flat, down just 0.03%. The price action suggests that speculative interest is flowing into assets beyond the largest players as the market anticipates the Fed’s upcoming policy decision.
What to Watch Today
Today is all about the Federal Reserve. The FOMC will release its monetary policy statement at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM ET. While the market has almost fully priced in a 25-basis point interest rate cut, the real focus will be on the Fed’s updated economic projections (the “dot plot”) and Chair Powell’s tone. Investors will be parsing every word for clues about the likely path of future rate cuts. A more “dovish” stance than expected could fuel a new leg up in the rally, while a “hawkish” tone that downplays the need for further easing could trigger a significant market pullback.
For a deeper dive into the data, access today’s full Daily ETF Data Pack.
This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. Investors should consider their investment objectives, risks, charges, and expenses carefully before investing.
This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.
