US stocks were little changed 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.
The tech-heavy Nasdaq Composite (^IXIC) rose about 0.1%. The S&P 500 (^GSPC) was just above the flat line, while the Dow Jones Industrial Average (^DJI) slipped 0.1%.
Stocks are ticking over as the market waits to find out how aggressive the Fed will be when it makes its first US interest rate cut since 2020 at the end of its meeting later Wednesday.
The significant policy shift is widely expected, given growing signs that the central bank has managed to cool inflation without severe harm to the economy. But investors are still guessing at whether hopes for a 0.5% cut will be fulfilled or the historic pattern of 0.25% moves will repeat itself.
Read more: Fed predictions 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 Fed officials earlier in September flagged they were more likely to trim the benchmark rate by 25 basis points. As of Wednesday morning, fed funds futures were pricing in a better than 60% chance the Fed goes large, up from just 15% odds a week ago.
Wall Street sees stock, bond, and currency markets as vulnerable to swings in the immediate aftermath of the Fed’s decision, seen as the least predictable in years.
Intense focus is also on the Fed’s new interest rate projections, an indication of how many rate cuts officials expect to see in the rest of 2024 and in 2025. The so-called dot plot will come when the Fed releases its policy decision at 2 p.m. ET.
Meanwhile, investors absorbed developments in the tech sector. Microsoft (MSFT) and BlackRock (BLK) are teaming up on an effort to raise $30 billion to build out AI infrastructure, while Google parent Alphabet (GOOG, GOOGL) won its bid to overturn a $1.7 billion EU antitrust fine related to digital ads.
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