Stocks higher amid debate on size of Fed rate cut

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U.S. stocks were muted in mid-day Wednesday trading, while moves in the dollar and the Treasury bond market reflected indecision amongst global investors as to how the Federal Reserve is likely to execute its first rate cut in more than four years later today.

Updated at 1:05 PM EDT

Coin flip

Stocks are holding onto modest gains heading into the final hour prior to the Fed’s September rate decision in Washington, with the S&P 500 rising 6 points, or 0.11% and the Nasdaq up 23 points, or 0.13%

Trading in the interest rate markets, meanwhile, suggests a paring of bets on an outsized Fed rate cut, with the CME Group’s FedWatch essentially indicating a coin flip heading into the 2:00 pm Eastern time announcement.

Updated at 11:56 AM EDT

Game stopped?

GameStop  (GME)  CEO Ryan Cohen has agreed to pay a near $1 million penalty tied to the purchase of Wells Fargo WFC shares.

The Federal Trade Commission said Cohen acquired around 520,000 Wells Fargo shares, but didn’t file forms to either the FTC or the Department of Justice required under the Hart-Scott-Rodino Act.

“When acquiring the Wells Fargo shares Cohen intended to influence Wells Fargo’s business decisions as evidenced by Cohen’s emails when he advocated for a board seat,” the complaint read. “After acquiring the shares, Cohen proceeded to have periodic communications with Wells Fargo’s leadership regarding suggestions to improve Wells Fargo’s business and to advocate for a potential board seat.”

Cohen will pay a fine of $985,320, the FTC said.

Updated at 9:37 AM EDT

Soft open

The S&P 500 was marked 2 points, or 0.04% lower in the opening minutes of trading, with the Nasdaq up 2 points and the Dow down 30 points. The mid-cap Russell 2000 was up 2 points, or 0.11%.

Benchmark 10-year note yields were marked at 3.681% while 2-year notes were trading at 3.632%.

Updated at 8:57 AM EDT

X Marks the spot

U.S. Steel  (X)  shares jumped higher in premarket trading following a report that suggested a probe into the security concerns tied to Japan-based Nippon Steel’s $15 billion takeover may be delayed.

Story continues

Reuters reported that the the Committee on Foreign Investment in the United States, known as CFIUS, has allowed for both parties to refile their application for approval, a move that likely means a final decision won’t come until after the November presidential elections.

US Steel shares were marked 3.5% higher in premarket trading to indicate an opening bell price of $37.50 each. Nippon has said it will pay $55 per share for the group.

Stock Market Today

Stocks ended mixed on Tuesday as investors watched Treasury yields nudge higher following a stronger-than-expected reading for August retail sales, which was paired with a rebound in industrial production.

Those moves added pressure to bets that the Fed is likely to cut its benchmark lending rate by a half a point today, its first cut since early 2020 and its first rate move in any direction since July of last year.

Traders are still betting on a big move today, however, even as the Atlanta Fed’s GDPNow forecasting tool was upgraded to a current-quarter growth rate of 3% following yesterday’s retail data, and headline inflation eased to a three-year low of 2.5% last month.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.14% lower in overnight dealing ahead of today’s rate decision at 2 pm Eastern time.

Benchmark Treasury bond yields, however, were inching higher, with 2-year notes at 3.617% and 10-year notes at 3.666%, perhaps reflecting some earlier overshoot in the segment of the market that is now looking to a smaller Fed cut later this afternoon.

“[Fed policy makers] have several reasons for go slow, including the continued robust rates of growth in GDP and consumers’ spending; the recent loosening of financial conditions and uncertainty over the degree to which some of the recent slowing in month-to-month increases in consumer prices is due to residual seasonality,” said Ian Shepherdson of Pantheon Macroeconomics.

Related: This Fed news may be more important than a rate cut this week

At present, however, the CME Group’s FedWatch pegs the odds of a 50 basis point move at 63%, with the 25-basis-point cut trading at 37%.

Fed officials will also publish fresh growth and inflation forecasts for the next two years, known formally as the Summary of Economic Projections but colloquially as the Dot Plots, that will inform markets on the direction of rate moves heading into 2025 and beyond.

Markets suggest the Federal Funds Rate, which currently sits at 5.375%, will fall to around 3.375% over the next two years, a path that would require two full percentage points of rate cuts over the next 24 months.

Rate bets derived from the FedWatch tool, however, suggest traders are looking for the Fed to reach that target rate by early spring.

The Fed itself, in the Summary of Economic Projections it published in June, estimated a Federal Funds Rate of 4.1% for next year, with a 3.1% forecast penciled in for 2026.

Stocks on Wall Street are also in wait-and-see mode, with futures tied to the S&P 500 suggesting a modest 7 point gain and those linked to the Dow Jones Industrial Average priced for a 55 point bump.

The tech-focused Nasdaq, meanwhile, is called 35 points higher at the start of trading.

More Wall Street Analysts:

In overseas markets, stocks were largely on the back foot ahead of today’s Fed decision and policy meetings from both the Bank of England and the Bank of Japan on Thursday.

Europe’s regionwide Stoxx 600 was marked 0.34% lower in Frankfurt, with Britain’s FTSE 100 falling 0.58% in London following some in-line inflation data for August.

Overnight in Asia, a weaker yen helped Japan’s Nikkei 225 rise 0.49% on the session, while the regional MSCI ex-Japan benchmark slipped 0.17% into the close of trading.

Related: Veteran fund manager sees world of pain coming for stocks