Ahead of Fed rate cut… U.S. stocks start mixed amid wait-and-see

Little movement in bond yields that already priced in a rate cut

Market: "96% chance of a 0.25% rate cut"

With the Federal Reserve's rate decision and Chairman Jerome Powell's press conference due at 2pm local time on the 17th (3am KST on the 18th), U.S. stocks opened mixed on thin volume as investors awaited the announcements.

At 10am Eastern Time, the S&P 500 was trading around 6,602 points. The Nasdaq index was down 0.3%. The Dow Jones Industrial Average was up 0.5%.

With expectations for a 0.25%p rate cut, the policy-sensitive 2-year Treasury yield, having already priced in the expected cut, was little changed at 3.51% on the day. The 10-year Treasury yield traded at 4.022%, down by basis points (1bp=0.01%) from the previous day and at almost the same level as the previous day.

By contrast, the 30-year Treasury yield, which had risen last month and earlier this month, fell 2bp to 4.62%, its lowest level since April 30.

Spot gold fell 0.3% to $3,677.15 per ounce. The dollar was little changed against major currencies.

After the Financial Times reported that China had banned its technology firms from buying NVIDIA chips, NVIDIA's shares were trading down 2% at $171.

Shares of ride-hailing service Lyft surged 15% on an announcement that it had partnered with Waymo, Google's self-driving car, to provide robotaxi services in the Nashville area from next year.

Eli Lilly said patients taking a diabetes drug in clinical trials showed superior weight loss and blood sugar control compared with patients taking Novo Nordisk's existing diabetes drug. After the announcement, Eli Lilly's shares rose 0.6%.

Tesla, which had risen for six consecutive days, was trading around $416, down 1.4% on the day. Palantir shares were also trading at $166, down 2%.

According to CME Group's FedWatch tool, the interest rate swap market is pricing a 96% probability of a 0.25%P rate cut today. This is because inflation remains persistently above the Fed's target while the labor market is rapidly slowing. However, the probability of a 0.5% cut sought by President Trump and Treasury Secretary Scott Bessent is reportedly only 4%.

Fed policymakers will also provide information on the rate outlook over the next roughly year through the "dot plot" attached to the quarterly Summary of Economic Projections.

Paul McCulley, former chief economist at PIMCO, told CNBC that a 50bp cut would be unrealistic unless the labor market had become extremely cold.

Pawad Razakzada of Forex.com said, "The possibility of a rate cut itself is already well priced in, so the wording and outlook for a rate cut are more important." He warned that if the Fed signals that future rate decisions will "be data-dependent and proceed more cautiously," short-term rates could spike.

He said Powell's press conference is another variable. If Chairman Powell focuses on job risks and ignores tariff-driven inflation, the rationale for easing policy would hold; if not, one should prepare for a stronger dollar.

Powell is expected to say at Wednesday's press conference that concerns about a labor market slowdown outweigh current inflation.

Jeong-a Kim, guest reporter kja@hankyung.com