NEW YORK (Reuters) – The New York Stock Exchange closed little changed on Tuesday, the day before the Federal Reserve’s rate decision, despite early gains after the release of reassuring data on the strength of the U.S. economy.

The S&P 500 ended up a small 0.03% at 5,634.58 points, after setting a session record of 5,670.81 points, as investors welcomed the unexpected increase (+0.1%) in retail sales and industrial production last month.

The index has thus erased the last traces of its plunge at the end of July caused by a surge in unemployment and fears of a recession due to restrictive rates.

The Dow Jones fell 15.90 points, or 0.04%, to 41,606.18 points and the Nasdaq Composite gained 35.93 points, or 0.20%, to 17,628.06.

The increase in retail sales in August suggests the U.S. economy held up well for much of the third quarter, but Jim Baird, an investment manager at Plante Moran Financial Advisors in Michigan, said it still shows a sharp slowdown in consumer spending after a 1 percent increase in July, which supports the possibility of a 50 basis point rate cut by the U.S. central bank.

“We have moved from what seemed to be the predominant opinion of a 25 basis point cut to the hypothesis of a more marked drop in rates,” he recalls.

By the end of Tuesday, money markets were pricing in a 50 basis point rate cut on Wednesday at the end of the two-day Federal Open Market Committee (FOMC) meeting as 65% likely, compared with a 34% probability last week.

“A rapid return to neutral is justified, and (Fed) Chairman Jerome Powell is likely to argue for a 50 basis point cut, but the question is whether the other members of the Governing Council share his view,” James Knightley, an economist at ING, observed during the session.

On the value side, Microsoft posted the biggest gain in the S&P (+0.88%) after approving a new share buyback program worth $60 billion and announcing a 10% increase in its quarterly dividend.

Intel shares (+2.68%) benefited from the company signing a contract with Amazon to supply chips for artificial intelligence.

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(Chuck Mikolajczak, Jean-Stéphane Brosse for the )

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