US stocks fell into a holding pattern on Wednesday as investors braced for the Federal Reserve’s long-awaited policy decision, with the market still divided on the size of the expected rate cut.
Futures for the Dow Jones Industrial Average (YM=F) and the S&P 500 (ES=F) rose nearly 0.1%, with record highs still within reach after a similarly muted finish on Tuesday. Contracts on the tech-heavy Nasdaq 100 (NQ=F) also added 0.1%.
Stocks ticked over as the market waited to see how aggressive the Fed would be when it made its first US interest rate cut since 2020 at the end of its meeting later on Wednesday.
A significant policy shift is widely expected based on growing signs that the central bank has managed to cool inflation without seriously harming the economy. But investors are still speculating whether hopes for a 0.5% cut will materialize or whether the historic pattern of 0.25% moves will return.
Read More: Fed projections for 2024: What experts say about the possibility of a rate cut
In recent days, traders have stepped up bets on a bigger cut, even after federal officials flagged in September that they were more likely to cut the benchmark rate by 25 basis points. As of Wednesday morning, Fed Funds futures were priced There is a more than 60% chance the Fed will go big, compared to 15% odds a week ago.
Wall Street views stocks, bonds and currency markets as volatile on the immediate effects of the Fed’s decision.
Serious attention is also being paid to the central bank’s new interest rate forecasts, an indication of how many rate cuts officials expect in 2024 and 2025. When the central bank publishes its policy decision it is known as a “dot plot”. 2 pm ET.
Meanwhile, investors absorbed developments in the technology sector. Microsoft ( MSFT ) and BlackRock ( BLK ) have joined forces to raise $30 billion to build AI infrastructure, while Google parent Alphabet ( GOOG ) won a bid to beat a $1.7 billion EU antitrust fine related to digital ads.
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