Wall Street Drifts Near Record Ahead of Fed

NEW YORK (AP) -- Wall Street is drifting near its all-time high Wednesday, ahead of an afternoon announcement from the Federal Reserve that could show whether all the optimism is warranted.

The S&P 500 was 0.1% higher in morning trading and just 3.1% below its record set early last year. The Dow Jones Industrial Average was down 8 points, or less than 0.1%, as of 10:20 a.m. Eastern time, and the Nasdaq composite was 0.3% higher

Big Tech stocks were helping to lead the way after getting some relief from easing yields in the bond market. Treasury yields sank after a report showed inflation at the wholesale level was a touch cooler last month than economists expected, and Nvidia rose 1.7%.

They helped offset an 8.7% loss for Pfizer, which gave a revenue forecast for 2024 that was weaker than analysts expected. Much of the shortfall was due to expectations for its COVID-19 vaccine and treatment.

Tesla slipped 1.3% after recalling more than 2 million vehicles across its model lineup to fix a defective system that's supposed to ensure drivers are paying attention when they use Autopilot.

But the main event for Wall Street is the Federal Reserve's announcement later this afternoon. The widespread expectation is for the Fed to say it's keeping its main interest rate steady. What may be more impactful is an accompanying set of projections, which will show where policy makers believe they may take interest rates in upcoming years.

The Fed has already yanked its main interest rate from nearly zero to more than 5.25%, its highest level since 2001, in hopes of slowing the economy and hurting investment prices by just the right amount: enough to snuff out high inflation but not so much that it causes a painful recession.

With inflation down sharply from its peak two summers ago and the economy still solid despite high interest rates, hopes have been rising that the Fed can pull off that perfect landing. Traders have built up expectations that the Fed could even begin cutting interest rates in the first half of 2024.

Some economists and investors expect Fed Chair Jerome Powell to use his press conference this afternoon to push against such hopes. He's already said recently that it's too early to consider when cuts to rates can come.

Wall Street wants cuts to rates and has already pushed up prices in anticipation of them because they can act like steroids for financial markets and help relax pressure on the economy and the financial system. Earlier this year, high interest rates helped lead to several high-profile collapses in the U.S. banking system.

In the bond market, the yield on the 10-year Treasury fell to 4.16% from 4.21% late Tuesday. The two-year yield, which moves more on expectations for the Fed, dropped to 4.69% from 4.73%.

They both sank after a report showed that prices at the wholesale level were just 0.9% higher in November than a year earlier. That was softer than economists expected and the second-lowest such reading since inflation began exploding in early 2021.

On Wall Street, Vertex Pharmaceuticals rose 7.8% for one of the biggest gains in the S&P 500 after it reported encouraging data from a study for a potential pain treatment for patients with diabetic peripheral neuropathy.

Southwest Airlines lost 5.8% after it raised its forecast for how much it will spend on fuel costs during the end of 2023.

In stock markets abroad, indexes were moving modestly higher in Europe following a mixed finish in Asia.

Japan's Nikkei 225 rose 0.3% after a report from the Bank of Japan showed business sentiment among major manufacturers improved.

Stocks fell more sharply elsewhere in Asia, including a 1.2% drop in Shanghai and a 0.9% decline in Hong Kong, as worries continue about the strength of China's economy, the world's second-largest.