Japan Stocks Set to Rise as Traders Await Fed, BOJ: Markets Wrap

(Bloomberg) — Stocks wavered amid uncertainties on how aggressive the Federal Reserve will be with rate cuts after holding them at a two-decade high for more than a year.

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The S&P 500 was little changed after briefly crossing its all-time closing high earlier this week. Treasury yields rose across the curve. Traders are fully pricing in a 25 basis-point Fed reduction Wednesday, with the chance of a bigger move viewed as a coin-flip.

Fresh quarterly projections released at the conclusion of the central bank’s two-day policy meeting will offer further insight into the path ahead for borrowing costs and the economy. The decision will be announced via a post-meeting statement at 2 p.m. in Washington. Jerome Powell will hold a press conference 30 minutes later.

The Nasdaq 100 was little changed. The Dow Jones Industrial Average fell 0.2%. The Russell 2000 added 0.3%. Treasury 10-year yields rose four basis points to 3.68%. The dollar retreated.

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Wall Street on Fed:

Peter Boockvar at The Boock Report:

There is high potential for market whiplash today.

If Powell cuts 25 bps, he’ll tell us that 50 bps is possible in the coming meetings. If he cuts by 50 bps, he’ll tell us not to get used to that cadence. Either way, this is all market noise as we’ve already priced in so many cuts through next year.

Fawad Razaqzada at City Index and Forex.com:

Uncertainty remains high regarding the size of the rate cut. Last week’s stronger-than-expected US core CPI and PPI inflation data led to speculation about a dovish shift. However, the rates market has since moved toward pricing in a 50 basis-point cut.

If the Fed opts for a smaller 25 basis-point cut, it will now surprise the market, likely causing a brief rally in the dollar — though this could be short-lived if Powell adopts a more dovish tone during his press conference.

Matt Maley at Miller Tabak:

It has been a very long time since it wasn’t well known what the Fed was going to do at any given meeting. This time around, the last-minute uncertainty on this subject could create more fireworks than usual.

We think they’ll go 25 basis points and then signal that they’re willing to be more aggressive if they need to be.

However, we certainly acknowledge that it could go either way. Of course, if they “only” go 25 bps, it will lead to debates about whether they’re skating behind the play. And if they to 50 bps, it will raise at least some questions about whether the Fed has become much more concerned about a hard landing.

Corporate Highlights:

A US security panel has granted Nippon Steel Corp. permission to refile its plans to purchase United States Steel Corp., for $14.1 billion, likely pushing a decision on the politically contentious takeover past the US elections in November, according to people familiar with the matter.
Elliott Investment Management still wants to replace Southwest Airlines Co. Chief Executive Officer Bob Jordan, according to a union official, suggesting changes the carrier has already promised aren’t enough to satisfy the activist shareholder.
23andMe Holding Co. co-founder and Chief Executive Officer Anne Wojcicki told employees that she remains committed to taking the genetic testing company private following the resignation of its independent board members.
Tupperware Brands Corp., whose plastic containers became synonymous with food storage, filed for bankruptcy following a years-long struggle with sales declines and growing competition.
Super Micro Computer Inc. was initiated at Needham with a buy recommendation.
Intuitive Machines Inc. said it got a contract from NASA with a maximum potential value of $4.82 billion.

Key events this week:

UK rate decision, Thursday
US Conf. Board leading index, initial jobless claims, US existing home sales, Thursday
FedEx earnings, Thursday
Japan rate decision, Friday
Eurozone consumer confidence, Friday

Some of the main moves in markets:

Stocks