Most Asian stocks were poised for declines early Tuesday following a mixed session on Wall Street where traders boosted bets the Federal Reserve will this week deliver a half-point rate cut.

Futures showed Tokyo’s equity benchmark will dip after being closed Monday, with Hong Kong also slipping and Sydney gaining. Markets in China and South Korea will remain shut for public holidays. US contracts were steady after the S&P 500 closed 0.1% higher and the Nasdaq 100 slid 0.5%, with investors maintaining a rotation out of the tech megacaps that have powered the bull market in stocks.

Money continued to flow into economically sensitive corners of the market, even as bond traders remained divided about whether policymakers will cut interest rates by a quarter point or a half point on Wednesday. Except for the central bank’s emergency rate cut in March 2020 at the onset of the pandemic, that’s the greatest amount of doubt in interest-rate swap markets for any scheduled Fed decision since 2007, according to data compiled by Bloomberg.

Still, strategists from Morgan Stanley to Goldman Sachs Group Inc and JPMorgan Chase & Co are saying that the size of the reduction is less relevant for stocks than the health of the US economy.

“We’re getting a rate cut of some sort this week absent an act of God,” said Callie Cox at Ritholtz Wealth Management. “The economic impact of one rate cut - regardless of whether it’s 25 or 50 basis points - will likely be insignificant. The path and degree of cuts over the next year or so matters the most.”

The Dow Jones Industrial Average gained 0.6%. The Bloomberg “Magnificent Seven” gauge of megacaps slipped 0.7%. The Russell 2000 of small firms added 0.3%.

“We remain positive on equities,” said John Stoltzfus at Oppenheimer Asset Management. “The broad rotation which began in the rally from last year’s S&P 500 low has deflected volatility repeatedly. Pullbacks experienced thus far this year have mostly looked like ‘trims’ and ‘haircuts’ for the S&P 500.”

Banks outperformed the broader market on bets a soft economic landing would trump margin pressures. Apple Inc. led losses in big tech as a closely followed analyst warned demand for the iPhone 16 Pro has been lower than expected. Treasury 10-year yields declined three basis points to 3.62%. The dollar fell to the lowest since January. Gold hit an all-time high.

In Asia, where markets in Indonesia and Malaysia will also reopen after being shut Monday, concern is growing about the strength of China’s economy. Disappointing economic data over the weekend is adding pressure on the authorities to ramp up fiscal and monetary stimulus if the nation is to reach this year’s growth target.

A gauge of Chinese stocks listed in Hong Kong swung to a gain in volatile trading on Monday as investors debated whether weaker macro data will prompt the government to bolster stimulus.

Meanwhile, the yen advanced past the key psychological level of 140 against the dollar on Monday as the Japanese currency extended its rally from the weakest point in nearly 38 years in July. The Bank of Japan is expected to stay on hold on Friday after raising rates twice this year.

In the US, the S&P 500’s equal-weighted version - one that gives Target Corp. as much clout as Microsoft Corp. - hit a record high on hopes the rally will broaden out. Technology giants like Nvidia Corp. and Microsoft have led gains in equities for much of the last two years, with investors attracted to their booming profits and exposure to artificial intelligence.

However, since the S&P 500 peaked on July 16, the so-called Magnificent Seven have mostly slumped, with the cohort of tech megacaps falling over 6%. Meantime, other industries have gained traction.

“Since technology stocks (temporarily?) peaked in July, the winners have been the remaining ‘493 stocks’ in the S&P 500,” said Paul Nolte at Murphy & Sylvest Wealth Management. “There have been plenty of ‘false starts’ when technology stocks seem to be done, only to see them regain a market-leadership position.”

Nolte says that over the past three to six months, the spread between the high flying technology sector and the average stock was large as early 2000.

“While history may not repeat itself, it would at least argue to reduce exposure to the tech sector for a while,” he concluded.

Some of the main moves in markets:

  - Bloomberg