Dow Jones Industrial Average drops as markets await Fed

• The Dow recoiled on Tuesday, trimming some off the top as investors brace for the Fed's latest rate call.
• The FOMC has started its two-day interest rate decision process; a rate cut is broadly expected.
• The Fed's dot plot adjustment will be the key datapoint for markets this week.

The Dow Jones Industrial Average (DJIA) shed 275 points at its lowest on Tuesday as investors buckle down ahead of the latest interest rate decision from the Federal Reserve (Fed). The Federal Open Market Committee (FOMC) will wrap up two days of deliberations on Wednesday and deliver what is broadly expected to be the Fed's first interest rate cut since pausing rate moves in January.

Rate cuts incoming, but how many?

A quarter-point interest rate cut is widely anticipated this week, but the key datapoint for markets will be the FOMC's update to its Summary of Economic Projections, or dot plot of policymakers' own interest rate expectations. Three straight rate cuts through the rest of the year are baked into interest rate markets, and investors will be looking for the Fed to play ball.

US Retail Sales came in much stronger than expected, rising 0.6% for the second month in a row in August. Core Retail Sales also accelerated to 0.7% MoM. However, Retail Sales data doesn't differentiate between price changes or an actual increase in sales volume. August's retail data pleased both sides of the interest rate discussion: strong retail activity, coupled with slumping hiring data, gives the Fed more runway to cut interest rates. Meanwhile, the no-cut camp will point to retail upswings to show that a tariff-fueled resurgence of inflation is a real and growing problem within the US economy.

Dow Jones daily chart