Stocks Edge Lower As Fed Rate Decision Looms, Treasury Yields Rise As Odds Improve For Smaller Cut: What's Driving Markets Wednesday?

Wall Street is jittery hours before the highly anticipated Federal Open Market Committee (FOMC) meeting, with all major indices posting modest losses by midday in New York. While a Federal Reserve rate cut is considered a done deal, the market remains divided on the magnitude of the cut.

Current implied probabilities show a 60% chance of a 50-basis-point reduction, while a smaller 25-basis-point cut has lately gained traction, rising to 40% odds, as per CME FedWatch.

The growing expectation of a smaller cut has pushed Treasury yields higher across the curve, reflecting a shift in market sentiment.

Amid this uncertainty, the CBOE Volatility Index (VIX), often ...