Markets Steady as Investors Await Fed Rate Cut Decision

The stock market ended the day mostly unchanged as traders paused ahead of the Federal Reserve’s upcoming decision on interest rates. The S&P 500 edged up slightly, gaining just 0.03% after touching a record high earlier in the session. Meanwhile, the Dow Jones Industrial Average slipped 15.9 points, or 0.04%, after also hitting an intraday high. The Nasdaq Composite added 0.2% on the day.

This period has historically been tough for the markets, with September often showing weak performance. According to data from FactSet, it has been the worst month for the S&P 500 over the past decade. Despite this, the index's recent gains show that investors remain cautiously optimistic, driven by hopes for favorable economic policy decisions.

Premarket Movers:

Federal Reserve Decision Sparks Uncertainty

The Federal Reserve’s latest meeting has introduced an unusual level of suspense. Typically, market participants can predict rate moves based on signals from Fed officials, but this time, there’s more ambiguity. Analysts agree that a rate cut is highly likely, but opinions vary on its size. The two main possibilities being debated are a 25-basis-point reduction or a more significant 50-basis-point cut.

Since July 2023, the Fed’s benchmark federal funds rate has remained in the range of 5.25% to 5.5%, the highest it’s been in 23 years. Investors will be closely watching for clues about future rate movements, as well as any updates on key economic indicators like unemployment, gross domestic product (GDP), and inflation.

Any cut would mark a shift in the Fed's approach, which has been focused on curbing inflation by maintaining high interest rates. A reduction in rates, especially if it's larger than expected, could boost market sentiment, as lower borrowing costs generally support economic growth.

Tech Mergers at a Crossroads

The uncertainty surrounding Fed policy isn’t the only factor influencing investor sentiment. The tech industry, long a dominant force in market growth, is also facing its own challenges. In 2021, tech mergers and acquisitions (M&A) reached a peak of $1.5 trillion, according to Dealogic. However, so far in 2024, the total for tech deals has dropped to $465 billion.

With the 2024 presidential election on the horizon, tech companies are at a turning point. Policies around Big Tech regulation remain unclear, with both major political parties offering little insight into their long-term plans.

Oil Prices Decline on Supply Worries and Fed Uncertainty

U.S. crude oil prices fell on Wednesday, dropping as traders awaited the Fed’s decision on interest rates. The West Texas Intermediate (WTI) crude for October delivery declined by 54 cents, or 0.8%, closing at $70.65 per barrel. Brent crude, the global benchmark, also slid 54 cents to $73.16 per barrel. Both benchmarks have faced significant drops in the third quarter, with WTI down over 13% and Brent falling more than 15%.

Natural gas bucked the downward trend in energy markets, rising 1.9% for the day. Despite this increase, natural gas is still down more than 5% year-to-date.

Oil traders are hoping that a Fed rate cut might provide some support for prices. Lower interest rates can weaken the U.S. dollar, making oil cheaper for foreign buyers and boosting demand. Andy Lipow, president of Lipow Oil Associates, said that a 25-basis-point cut is already priced into the oil market. However, a more aggressive 50-basis-point cut could provide additional support by putting downward pressure on the dollar.