Wall St subdued as investors await Fed decision with bated breath
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Fed rate decision due at 2:00 p.m. ET
Intuitive Machines soars after clinching NASA contract
US Steel up as CFIUS delays Nippon merger decision, sources say
Indexes: Dow off 0.11%, S&P 500 edges up 0.06%, Nasdaq up 0.13%
Updated at 9:45 a.m. ET/1345 GMT
By Johann M Cherian and Purvi Agarwal
Sept 18 (Reuters) -Wall Street's main indexes were flaton Wednesday as investors stepped onto the sidelines ahead of theFederal Reserve's highly anticipatedfirst interest rate cut in more than four years, with bets favoring a 50-basis-point reduction.
Borrowing costs have stayed at their highest levels in over two decades since July 2023, when the central bank last hiked interest rates by 25 basis points to between 5.25% and 5.50% to combat inflation. But the focus recently has been more about a moderating labor market.
At 9:45 a.m., the Dow Jones Industrial Average .DJI fell 40.18 points, or 0.11%, to 41,560.69, the S&P 500 .SPX gained 3.11 points, or 0.06%, to 5,637.69 and the Nasdaq Composite .IXIC edged up 22.76 points, or 0.13%, to 17,650.82.
Nine of the 11 S&P 500 sectors traded flat, although energy .SPNY and industrials .SPLRCI edged up 0.3% each.
The Russell 2000 index .RUT, tracking small caps which tend to fare better in a lower interest-rate environment, crept up 0.19%.
The benchmark S&P 500 .SPX and the blue-chip Dow .DJI both recovered from an early August rout and are trading just shy of their respective record highsahead of the Fed decision, expected at 2:00 p.m. ET.
Economic indicators over the previous one month have been relatively mixed, making investors nervous ahead of theleast predictable Fed decision in years.
Following dovish commentary from present and former Fed officials recently, traders are now pricing in 61% chances of a bigger 50-basis-point reduction, according to the CME Group's FedWatch tool.
Some analysts, however, caution that an outsized move from the central bank could spook markets.
Bets for a smaller 25-bps cut have now slipped to 39% from 86% a week ago. Investors will also be watching for comments from Fed Chair Jerome Powell at 2:30 p.m. ET to gauge the central bank's stance on the economy and prospects of further rate cuts this year.
"It's been the first meeting in a while that you have no 100% consensus on whether it's going to be one (quarter-percentage-point) cut or two," said Mike Dickson, head of research in quantitative strategies at Horizon Investments.
"No matter what happens today, there's going to be some people that get what they expected and some people that don't."
Stock options are pricing an about 1.1% swing, in either direction, for the S&P 500 after the Fed's verdict, according to options analytics service ORATS.
Markets have rallied this year, with all three major indexes setting record highs on prospects of lower interest rates as inflation moderated and the jobs market showed gradual signs of cooling.
Heavyweight growth stocks such asApple AAPL.Oclimbed 1% and Alphabet GOOGL.O added 0.41%, while Microsoft MSFT.O slipped 0.57%.
Intuitive Machines LUNR.O jumped 52% after clinching a $4.8 billion navigation services contract from NASA.
U.S. Steel X.N rose 1.7% after sources said the U.S. national security panel reviewing Nippon Steel's 5401.T bid for the U.S.-based steel maker let thecompanies refile their application for approval of the deal.
Advancing issues outnumbered decliners by a 1.75-to-1 ratio on the NYSE and by a 1.26-to-1 ratio on the Nasdaq.
The S&P 500 posted 16 new 52-week highs and no new lows, while the Nasdaq Composite recorded 23 new highs and 21 new lows.
Index performance over the past year https://reut.rs/47sKowp
Reporting by Purvi Agarwal and Johann M Cherian in Bengaluru; Editing by Pooja Desai and Maju Samuel
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