Wall Street Is Stuck as the Countdown to a Rate Cut Ticks Closer to Zero

NEW YORK (AP) -- U.S. stock indexes are holding near their records Wednesday ahead of an announcement in the afternoon that's expected to kick off a series of cuts to interest rates meant to prevent a recession.

The S&P 500 was 0.1% lower in morning trading and sitting 0.7% below its all-time high set in July. The Dow Jones Industrial Average was down 119 points, or 0.3%, but still near its record set on Monday. The Nasdaq composite was basically flat, as of 10:35 a.m. Eastern time.

Intuitive Machines soared 60% after NASA awarded it with a contract worth up to $4.82 billion for communication and navigation services the space agency will use to establish a long-term presence on the moon.

Trading in Tupperware Brands remains halted after the company filed for Chapter 11 bankruptcy protection. Its stock has been sinking, down to 51 cents, since a mini-revival early in the pandemic sent its stock above $30.

McGrath RentCorp., a company that rents and sells mobile office trailers, portable classrooms and other structures, fell 2.5% after it agreed to terminate its proposed buyout by WillScot following tough scrutiny of the deal from U.S. regulators.

The main event for financial markets, though, is still to come. When the Federal Reserve closes its latest policy meeting Wednesday afternoon, the widespread expectation is that it will announce the first cut to its main interest rate in more than four years.

It would be a momentous event, closing the door on a run where the Fed jacked its federal funds rate to a two-decade high in hopes of slowing the economy enough to stifle the worst inflation in generations. Now that inflation has eased back significantly from its peak two summers ago, the Fed has said it can turn more of its attention toward protecting the job market and overall economy, which have already begun slowing under the weight of higher rates.

The only question is how much the Fed will cut rates by to do so, which can prove to be a tricky balance. Lowering rates would ease the brakes off the economy by making it easier for U.S. businesses and households to borrow. But it could also offer more fuel for inflation.

Making things more complicated, some critics say the Federal Reserve is moving too late to protect the economy and may have missed the window to prevent a recession. Others, meanwhile, are saying it will need to be careful about cutting rates too much because of the possibility that inflation remains stubbornly higher than it has in recent decades.

For now, the bet on Wall Street is that the Federal Reserve will deliver a larger-than-usual cut to interest rates Wednesday afternoon. Traders are pricing in a roughly 60% probability that it will bypass the traditional-sized move of a quarter of a percentage point and jump directly to a half point, according to data from CME Group.

Treasury yields have been sinking since the spring on excitement about coming cuts to interest rates, but they rose Wednesday amid the debate about how big the afternoon's move will be.

The 10-year Treasury yield climbed to 3.69% from 3.65% late Tuesday. The two-year yield, which more closely follows expectations for Fed action, rose to 3.65% from 3.60%.

In stock markets abroad, indexes were modestly lower in Europe after finishing higher in much of Asia.

The Bank of Japan and the Bank of England are also holding monetary policy meetings later this week. Neither central bank is expected to move on rates, though the language of what the officials say could be an indicator of later moves and still influence markets.

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AP Business Writers Yuri Kageyama and Matt Ott contributed.

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