Wall Street pulled back slightly Tuesday as investors locked in profits following a string of record-setting gains and turned their focus to the Federal Reserve's closely watched policy meeting.
The S&P 500 edged down 0.13% to close at 6,606.76 after touching a fresh intraday record earlier in the session. The Nasdaq Composite slipped 0.07% to 22,333.96, while the Dow Jones Industrial Average lost 125.55 points, or 0.27%, to end at 45,757.90.
Market leaders that powered much of this year's rally were under pressure. Nvidia fell 1.6% and Microsoft dropped 1.2%, while Alphabet and Palantir also retreated. The pullback comes as the Fed began its two-day policy meeting, where it is widely expected to deliver its first rate cut since December. Futures markets are fully pricing in at least a quarter-point reduction, with traders looking for guidance on whether policymakers see room for one or two more cuts before year-end. Chair Jerome Powell's post-meeting press conference on Wednesday will be closely parsed for clues on the path of rates.
The meeting is unfolding against a politically charged backdrop, with the Senate confirming President Donald Trump's nominee Stephen Miran to the Fed board and Trump seeking to remove Governor Lisa Cook, who will vote alongside Miran this week.
Despite softening labor demand, recession risks remain limited, said Seema Shah of Principal Asset Management, who warned that a larger 50-basis-point move would appear politically motivated. She argued a 25-point cut would allow the Fed to get ahead of any slowdown without overreacting to early signs of strain.
Global trade also remains in focus. U.S. Treasury Secretary Scott Bessent signaled optimism after talks with Chinese officials in Madrid, suggesting Beijing now sees a deal as possible ahead of reciprocal tariffs slated for November. Those discussions produced a tentative framework allowing TikTok to continue operating in the U.S., with Oracle named as a key technology partner, sending its stock 1.5% higher.
Other corporate movers included Eli Lilly, up over 2% after announcing plans for a $5 billion manufacturing facility in Virginia, and Nio, which climbed more than 2% after an upgrade from UBS. Webtoon Entertainment surged 31% on news of a digital comics partnership with Disney, while Hims & Hers tumbled 7% after an FDA warning. Meanwhile, gold hit a new record above $3,699 an ounce as investors braced for a rate cut, and cryptocurrency prices held steady ahead of the Fed decision.
Analysts broadly expect a quarter-point cut accompanied by a dovish tone, with former PIMCO executive Paul McCulley predicting up to 100 basis points of easing over time. Ritholtz Wealth's Josh Brown said monetary policy turning more accommodative should ultimately support higher equity prices, despite recent signs of labor market cooling.
Big banks also drew attention after Wells Fargo's Mike Mayo reaffirmed Citi as his top pick and raised price targets across the sector, while Barclays boosted its target on Taiwan Semiconductor, citing robust AI-driven demand.
