Retail sales data, Fed policy meeting: Stock futures edged lower as Wall Street braces for live update

Investors on Tuesday will analyze August retail sales data for a final glimpse into the health of US consumers ahead of the Fed rate decision. Economists polled by Dow Jones are poised for a 0.2% decline. Excluding autos, they see a 0.2% gain. Results may affect rate cut results.

Wall Street is on standby for the Fed's long-awaited rate cut, a move that could help boost earnings for companies against a backdrop of steep borrowing costs and high inflation. The Fed first began its aggressive hiking campaign in March 2022.

Wall Street expects a cut on Wednesday, with markets divided over the size of the potential cut. Traders are currently pricing in a 67% chance that the central bank will cut rates by 50 basis points, according to CME Group's Fed Watch tool. That's up from a roughly 47% chance on Friday.

“Market expectations are divided between a 25 basis point and a 50 basis point rate cut, as the decision is compounded by conflicting signals of solid economic activity but a weak labor market,” said Seema Shah of Principal Asset Management. “Rarely have market expectations been so torn apart, so closely [Federal Open Market Committee] meeting.”

While a 50 basis point cut is not out of the question, the chief global strategist thinks the Fed should take a more cautious approach to cutting rates by 25 basis points. He is forecasting cuts of an additional 25 basis points in November and December.

In other economic news, industrial production and manufacturing production data are due for August, along with September's National Association of Home Builders housing market index.