Stocks Swing as Traders Are Mixed on Fed Cut Expectations – US Market Wrap

Stocks remained near all-time highs ahead of the Federal Reserve’s decision, with traders divided on the size of an interest rate cut.

The S&P 500 closed little changed after briefly approaching a record high amid a surprise increase in US retail sales. Economically sensitive industries once again outperformed big technology. Treasury yields rose slightly, with shorter maturities driving the increase. The market implied odds that policymakers would announce a 50-basis-point rate cut on Wednesday were approximately 55%.

According to a survey conducted by 22V Research, expectations for the market reaction to the Fed decision are determined by bets on the size of the cut. Investors who anticipate a 25 basis-point reduction are divided on whether the cut will result in a “risk-on” or “risk-off” reaction. Meanwhile, those betting on 50 basis points believe that a smaller Fed move would be “risk-off.”

The Nasdaq 100 and Dow Jones Industrial Average also finished little changed. The Russell 2000 index of smaller firms rose 0.7%. Treasury 10-year yields rose by two basis points to 3.64%. The dollar rose.