US futures await Fed decision

US stocks were caught in a holding pattern on Wednesday as investors braced for the Federal Reserve’s long-awaited policy decision, with the market still divided over the size of the expected rate cut.

Futures on the Dow Jones Industrial Average (YM=F) and the S&P 500 (ES=F) rose about 0.1 percent, with record highs still within reach after a similarly low close on Tuesday. Contracts on the Nasdaq 100 (NQ=F) also rose 0.1%.

Stocks are trading higher as the market waits to see how aggressive the Fed will be when it makes its first US interest rate cut of 2020 at the end of its meeting on Wednesday.

The significant policy shift is widely expected given growing signs that the central bank has been able to reduce inflation without severely damaging the economy. But investors are still guessing whether hopes for a 0.5% cut will be met or whether the historical pattern of 0.25% moves will repeat itself.

Read more: Fed forecasts for 2024: What experts say about the possibility of a rate cut

In recent days, traders have increased bets on a further cut even after Fed officials in early September signaled they were more likely to cut the benchmark rate by 25 basis points. As of Wednesday morning, Fed Funds futures were pricing in a greater than 60 percent chance the Fed would go big, up from just 15 percent a week ago.

Wall Street sees stock, bond and currency markets as vulnerable to immediate swings after the Fed’s decision, seen as the least predictable in years.

Close attention is also being paid to the Fed’s new interest rate forecasts, an indication of how many rate cuts officials expect to see in the rest of 2024 and into 2025. The so-called “dot plot” will comes when the Fed releases its policy decision at 2 pm ET.

Meanwhile, investors absorbed developments in the technology sector. Microsoft ( MSFT ) and BlackRock ( BLK ) are teaming up in an effort to raise $30 billion to build AI infrastructure, while Google parent Alphabet ( GOOG ) won a bid to overturn an EU antitrust fine of $1.7 billion related to digital advertising.