Stock futures exhibited minimal movement late Tuesday as investors geared up for a critical monetary policy decision from the Federal Reserve, set to be announced on Wednesday. S&P 500 futures edged up by 0.02%, while Nasdaq-100 futures mirrored this gain with a similar increase. Dow Jones Industrial Average futures added 13 points, equating to a 0.03% rise.
The prevailing expectation among traders is a reduction in interest rates by the Federal Reserve, a strategy seen as a method to invigorate the U.S. economy amid signs of a decelerating labor market, paired with persistent inflation rates that continue to eclipse the central bank’s target of 2%. The Federal Reserve is anticipated to provide additional context regarding its future rate outlook through the “dot plot” grid, which accompanies its quarterly Summary of Economic Projections.
Investors are also keenly observing for any dissenting opinions from Fed officials, following two disagreements noted during the last meeting in July. Current market indications suggest that there is a staggering 96% probability of a 25 basis point, or quarter percentage point, rate cut, while the likelihood of a half-point reduction is estimated at just 4%, based on data from interest rate futures trading at the CME Group.
Paul McCulley, former managing director at PIMCO, shared his insights in an interview on CNBC’s “The Exchange.” He expressed that a conservative, quarter-point rate cut is the most plausible outcome from the Federal Open Market Committee’s forthcoming meeting. McCulley emphasized the challenge of justifying a 50 basis point cut at this juncture without signaling deep concern over the labor market, a message he believes Federal Reserve Chair Jerome Powell would prefer to avoid for the time being.
On the trading floor, stocks concluded the day with slight fluctuations. The S&P 500 reached a new intraday record before retracting gains later in the session. Meanwhile, the Dow Jones Industrial Average recorded a decline of 125.55 points, finishing 0.27% lower at 45,757.90. The tech-heavy Nasdaq Composite did not register any fresh gains on Tuesday, following its record close on the previous day.
