Stocks Edge Lower As Fed Rate Decision Looms, Treasury Yields Rise As Odds Improve For Smaller Cut: What's Driving Markets Wednesday?

Wall Street is jittery hours before the highly anticipated Federal Open Market Committee (FOMC) meeting, with all major indices posting modest losses by midday in New York. While a Federal Reserve rate cut is considered a done deal, the market remains divided on the magnitude of the cut.

Current implied probabilities show a 60% chance of a 50-basis-point reduction, while a smaller 25-basis-point cut has lately gained traction, rising to 40% odds, as per CME FedWatch.

The growing expectation of a smaller cut has pushed Treasury yields higher across the curve, reflecting a shift in market sentiment.

Amid this uncertainty, the CBOE Volatility Index (VIX), often seen as the market’s fear gauge, spiked 8%, signaling heightened investor anxiety.

The U.S. dollar steadied, recovering from overnight losses. Commodities retreated, with oil prices down 0.9%, despite a fresh escalation of tensions in the Middle East, and silver slipping 1%. Gold remained flat.

In the cryptocurrency market, Bitcoin BTC/USD declined 1.5%, dipping below the $60,000 mark after a 3.6% rally on Tuesday.

Wednesday’s Performance In Major U.S. Indices, ETFs

According to Benzinga Pro data:

• The SPDR S&P 500 ETF Trust SPY was 0.3% lower to $561.44.
• The SPDR Dow Jones Industrial Average DIA fell 0.3% to $416.11.
• The tech-heavy Invesco QQQ Trust Series QQQ fell 0.4% to $471.53.
• The iShares Russell 2000 ETF IWM eased 0.5% to $218.40.
• The Energy Select Sector SPDR Fund XLE outperformed, up 0.2%. The Technology Select Sector SPDR Fund XLK lagged, down 0.8%.

Wednesday’s Stock Movers

• ResMed Inc. RMD fell over 5% after Wolfe Research cut the stock rating from ‘Peer Perform’ to ‘Underperform.’
• General Motors Co.GM shares surged over 2% on Wednesday following the announcement that its electric vehicle customers will soon be able to access Tesla Inc. TSLA’s Supercharger network using a GM-approved adapter.

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Image created using artificial intelligence via Midjourney.