Stock futures rise slightly as Wall Street anticipates a long-awaited Fed rate cut: Live updates

Stock futures rose slightly Wednesday as Wall Street anticipated a long-awaited rate cut from the Federal Reserve following an aggressive multiyear hiking campaign aimed at tamping down hot inflation.

Futures tied to the Dow Jones Industrial Average added 70 points, or 0.2%. S&P 500 futures gained 0.1%, and Nasdaq-100 futures advanced 0.2%.

The Fed is expected to deliver its latest policy decision at 2 p.m. ET. The central bank is expected lower rates by at least a quarter percentage point, but traders are divided over how big the reduction will be. CME Group’s FedWatch tool shows traders pricing in a 65% chance of a 50 basis point cut, and 35% odds of a 25 basis point move.

Rate cuts generally benefit companies’ earnings growth and will usher in a welcome reprieve following a prolonged period of high borrowing costs and sticky inflation.

The cutting cycle may also yield more gains for an already strong market, with the S&P 500 already up 18% this year. Data from Canaccord Genuity shows that since 1974, the index has rallied a median of 6.4%, 9.8% and 15.6% in the three, six and 12 months following an initial cut, respectively.

Despite these market expectations, some investors remain cautious about cutting rates too much, too soon. Peter Cecchini, Axonic Capital’s director of research, called a 50 basis point cut “unusual” as the first move in a cutting cycle from the Fed given the current state of the housing market.

“This is not really the environment where I think the Fed needs to do a 50 basis point cut as a preemptive measure, when historically it’s never done so,” he told CNBC’s “Closing Bell” on Tuesday.

Wall Street is coming off a mixed session that saw the S&P 500 edge up 0.03% after notching another all-time high during intraday trading. The Dow Jones Industrial Average lost nearly 16 points, while the Nasdaq Composite added 0.2%.