US stocks muted as caution prevails ahead of Fed decision

Wall Street's main indexes were subdued in choppy trading on Wednesday, as investors anticipated an interest rate cut from the Federal Reserve in its final meeting of the year and awaited clues on what policymakers could do in 2025.

The Fed is widely expected to reduce interest rates by 25 basis points at its meeting. The announcement is expected at 2 p.m. ET on Wednesday.

With a rate cut expected by most investors, more focus is on the Fed's summary of economic projections (SEP), which includes policymakers' forecasts for the economy and the "dot plot" of their expectations for interest rates over the longer term.

Comments from Chair Jerome Powell will also be watched for clues on how the central bank will determine policy next year, as recent economic data has shown both strong growth and persistent inflation that could keep the Fed from cutting rates as much as previously forecast.

"The question is more about what happens next and what's the rhetoric around 2025. Powell really kind of kept markets stable enough to continue the upward trajectory in 2022, and we expect today to be similar," said Keith Buchanan, senior portfolio manager, Globalt Investments.

At 9:45 a.m. ET, the Dow Jones Industrial Average rose 65.44 points, or 0.15%, to 43,514.59, the S&P 500 lost 5.81 points, or 0.10%, to 6,044.65 and the Nasdaq Composite lost 20.19 points, or 0.10%, to 20,088.87.

Most rate-sensitive megacap and growth stocks were down, with Tesla in the lead, dropping 2.7% after rising over 14% in the last three sessions.

On the flip side, AI giant Nvidia was up 3.8% after hitting an over two-month low on Tuesday.

Yield on the benchmark 10 year Treasury bond ticked higher with the change in Fed expectations, adding pressure on rate-sensitive stocks. It was last at 4.3968%.

Birkenstock advanced 7.8% after the footwear maker beat market expectations for fourth-quarter results, while General Mills fell 4% after the Cheerios maker slashed its annual profit forecast.

The Dow is set to snap a nine-session losing streak, its longest since February 1978, on a boost by healthcare stocks.

Dow-component Merck gained marginally after the drugmaker signed a deal worth up to $2 billion with Hansoh Pharmaceuticals to develop and commercialize the Chinese biotech's experimental obesity drug.

Despite some jitters over future Fed policy, stocks are on track to end the year strong with the S&P 500 up nearly 27%, the Nasdaq up nearly 34% and the Dow up over 15%.

The rally has been fueled by technology companies that capitalized on the euphoria around artificial intelligence, the prospects of a lower rate environment and hope of pro-business policies from the incoming Donald Trump administration.

Crypto-focused stocks slipped as bitcoin fell 1.9%. MARA Holdings and Riot Platforms down 2.1% and 1.9%, respectively.

Advancing issues outnumbered decliners by a 1.24-to-1 ratio on the NYSE and by a 1.4-to-1 ratio on the Nasdaq.

The S&P 500 posted three new 52-week highs and five new lows, while the Nasdaq Composite recorded 48 new highs and 47 new lows.