Traders work on the floor of the New York Stock Exchange on June 12, 2024, as a screen shows Federal Reserve Chairman Jerome Powell’s press conference following the Fed’s interest rate announcement.
Brendan McDiarmid | Reuters
Stock futures were flat in overnight trading on Tuesday as Wall Street anticipated a long-awaited interest rate cut from the Federal Reserve after years of an aggressive campaign of rate hikes to tame soaring inflation.
Futures Dow Jones Industrial Average Add 30 points, S&P 500 Futures The futures traded near the flat line. Nasdaq 100 It increased by about 0.1%.
Wall Street is S&P 500 It rose 0.03% after hitting another all-time high in intraday trading. Dow Jones Industrial Average Losing nearly 16 points, Nasdaq Composite Index Added 0.2%.
Investors are on high alert as the Fed is expected to cut interest rates for the first time at the end of a two-day policy meeting on Wednesday. This month’s meeting is being marked as one of the most important in years as the Fed prepares to unwind an aggressive rate-hiking cycle that began in March 2022.
Cuts in interest rates are generally positive for corporate earnings growth and would provide a welcome respite after a long period of high borrowing costs and rising inflation. A cycle of rate cuts could also bring further gains to an already strong market. The S&P 500 is up 18% already this year. Since 1974, the index has risen by a median of 6.4%, 9.8% and 15.6%, respectively, three, six and 12 months after the first rate cut, according to data from Canaccord Genuity.
A rate cut appears imminent, but traders are divided on the size of the cut. Traders rate a 50 basis point cut as likely at 63 percent, and a 25 basis point cut as likely at 37 percent, according to CME Group’s FedWatch tool.
Despite the market’s expectations, some investors remain wary of cutting rates too quickly. Peter Cecchini, director of research at Axonic Capital, said a 50-basis-point cut would be “unusual” as the first move in a rate-cutting cycle from the Fed, given the current state of the housing market.
“Historically, the Fed has never cut rates by 50 basis points as a precautionary measure, and I don’t see the need for the Fed to do that in the current circumstances,” he said on CNBC’s “Closing Bell” on Tuesday.
