Wall Street Edges Up Ahead of Expected Fed Interest Rate Cut

Wall Street saw slight gains early on Wednesday as investors braced for an anticipated interest rate cut by the U.S. Federal Reserve, marking the first reduction in more than four years.

Prior to the opening bell, futures for both the S&P 500 and Dow Jones industrial average recorded increases of less than 0.1%.

The Federal Reserve is expected to make its announcement later in the day, with most analysts predicting a reduction in the federal funds rate, which has remained in the 5.25% to 5.50% range for over a year.

Since early 2022, the Fed has raised interest rates eleven times over approximately seventeen months to combat the highest inflation rates seen in four decades, resulting from a rapid economic recovery following the COVID-19 recession of 2020.

While the exact magnitude of the rate cut remains uncertain, many on Wall Street speculate that officials may announce a larger-than-usual half-point reduction. However, a more standard quarter-point cut is also anticipated by several analysts.

With current inflation rates just above the target level, the Fed has been shifting its focus toward bolstering a weakening job market. Their goal is to achieve a rare “soft landing,” which entails reducing inflation without triggering a recession. A half-point cut would indicate the Fed’s commitment to fostering healthy economic growth while also tackling high inflation issues. Analysts suggest that this week’s decision may be just the beginning of a series of rate cuts expected to persist into 2025.

Lowering rates could stimulate the sluggish economy as borrowing costs for everything from homes to vehicles and corporate loans have become increasingly burdensome.

In individual stock news, Tupperware Brands experienced a sharp decline of 7.5% following its announcement of filing for Chapter 11 bankruptcy protection. The Orlando-based company, which saw a brief revival during the pandemic as people turned to home cooking, intends to continue operations while seeking court approval for a business sale.

Meanwhile, shares of consumer genetics company 23andMe Holding Co. plummeted over 9% after seven independent directors resigned from its board, citing dissatisfaction with the management’s failure to provide a “fully financed, fully diligenced, actionable proposal” that benefits non-affiliated shareholders. Since its public debut in 2021, 23andMe has struggled to post quarterly profits—its shares now trading at about 31 cents.

Microsoft announced a partnership with asset management giant BlackRock and tech investor MGX to raise $30 billion aimed at establishing new and expanded data centers to meet the surging demand for computing power in artificial intelligence sectors. Despite the announcement, shares for both Microsoft and BlackRock remained largely unchanged in pre-market trading.

Across the ocean, European markets showed signs of decline as France’s CAC 40 dipped 0.4%, and Britain’s FTSE 100 lost 0.6%. The DAX index in Germany experienced a slight decrease of less than 0.1%.

Later in the week, both the Bank of Japan and the Bank of England are set to hold monetary policy meetings. However, no immediate rate changes are expected from either bank. Analysts will be keenly focused on the commentary from officials, as it could indicate future moves and influence market performance.

Asian markets saw an upward trend, with Japan’s Nikkei 225 gaining 0.5% to close at 36,380.17. Conversely, Australia’s S&P/ASX 200 remained nearly unchanged with a minor uptick of less than 0.1% at 8,142.10. South Korea’s Kospi added 0.1%, reaching 2,575.41.

Although trading was halted in Hong Kong due to a national holiday, the Shanghai Composite index rose by 0.5%, closing at 2,717.28. Japan reported a trade deficit of 695 billion yen (approximately $4.9 billion) for August, marking a 26% decrease from the previous year, indicating deficits for the second consecutive month.

Exports totaled 8.4 trillion yen ($59 billion), indicating a 5.6% increase from the same month in the previous year, while shipments to Asia increased and exports to the U.S. fell. Total imports amounted to 9.1 trillion yen ($64 billion), marking a 2.3% rise year-on-year. Imports from European countries, particularly in the pharmaceuticals sector, saw the most significant growth.

Both import and export figures fell short of the projected 10% growth for exports and even steeper increases anticipated for imports.

In recent weeks, the yen has appreciated against the U.S. dollar, enhancing Japan’s purchasing power. The dollar fell to 141.90 yen from 142.34 yen, having exceeded 150 yen earlier this year. Meanwhile, the euro rose slightly to $1.1121 from $1.1117.

In energy markets, benchmark U.S. crude oil prices decreased by 51 cents, settling at $69.45 per barrel, while Brent crude—the global standard—dropped by 50 cents to $73.20 per barrel.