Wall Street holds near record high as countdown to rate cut ticks away

US stock indexes are hovering near their record highs on Wednesday, ahead of an anticipated announcement in the afternoon that's expected to initiate a series of interest rate cuts aimed at staving off a recession.

The S&P 500 remained virtually unchanged in early trading and is just 0.6% shy of its all-time high set in July. The Dow Jones Industrial Average was slightly down by 48 points, or 0.1%, but still teasing another record after setting its latest one on Monday.

The Nasdaq composite was essentially flat, as of 9:35am Eastern time. Shares in Intuitive Machines rocketed 57% after NASA awarded it a contract worth up to $4.82billion for communication and navigation services that the space agency will use to establish a long-term presence on the moon.

General Mills dipped 0.2% despite the maker of Cheerios and Annie's mac and cheese reporting profit and revenue for the latest quarter that exceeded expectations. Analysts at Citi suggested investors may have been hoping for an even better performance following seemingly encouraging commentary by the company at an earlier investor conference.

However, the main event for financial markets is yet to come. When the Federal Reserve concludes its latest policy meeting on Wednesday afternoon, the widespread expectation is that it will announce the first cut to its main interest rate in more than four years. A momentous event is on the horizon, marking the end of a period where the Fed hiked its federal funds rate to a two-decade high in an attempt to slow the economy and curb the worst inflation in generations.

Now that inflation has significantly retreated from its peak two summers ago, the Fed has stated it can focus more on safeguarding the job market and overall economy, which have already started to slow due to higher rates. The key question is by how much the Fed will reduce rates, a delicate balancing act. Lower rates would stimulate the economy by making borrowing easier for US businesses and households, but could also stoke inflation.

Adding to the complexity, some critics argue that the Federal Reserve is acting too late to shield the economy and may have missed the opportunity to avert a recession. Others caution against cutting rates too drastically due to the risk of persistent inflation.

Currently, Wall Street is wagering that the Federal Reserve will implement a larger-than-usual cut to interest rates on Wednesday afternoon. Traders are factoring in a roughly 60% chance that it will skip the traditional quarter-point move and go straight to a half point, according to data from CME Group.

Treasury yields, which have been on a downward trend since spring due to anticipation of interest rate cuts, saw a slight firming on Wednesday amidst debates over the scale of the afternoon's adjustments. The 10-year Treasury yield increased to 3.67% from 3.65% on Tuesday, while the two-year yield, more reflective of Fed action expectations, rose to 3.62% from 3.60%.

Overseas stock markets presented a mixed picture in Europe, following gains across much of Asia. Later this week, both the Bank of Japan and the Bank of England are set to hold monetary policy meetings. Neither institution is predicted to alter rates, however, the wording used by officials could hint at future actions and potentially sway markets.