Stocks Fluctuate Ahead of Fed Meeting

Updated from 10:29 a.m. EDT

Stocks on Wall Street were fluctuating Wednesday, as traders combed through a bevy of corporate earnings and awaited an expected cut in the Federal Reserve's key target interest rate.

The Dow Jones Industrial Average was lately just about flat at 9066, and the S&P 500 gave back 3.6 points to 936. The Nasdaq dropped 6 points to 1643.

During Wednesday's session, investors were eyeing the Fed's next move regarding interest rates. Policymakers began a two-day meeting Tuesday, and around 2:15 p.m. EDT the market will know definitively if rates have been reduced again. Observers widely expect the central bank to cut the fed funds target rate 50 basis points to 1% to provide additional liquidity to dysfunctional lending markets.

"If they cut, it's for psychological reasons," said Jack Ablin, chief investment officer at Harris Private Bank. Harris said the incremental benefit from a rate cut would not be very great, and he'd prefer a rate cut by the European Central Bank. "In my view, this commercial-paper program that the Treasury initiated yesterday will do way more to fuel borrowing and lending than a lower fed funds rate."

"The real story regarding the Federal Reserve is its various liquidity operations; the federal funds rate is second fiddle," wrote Tony Crescenzi, chief bond market strategist at Miller Tabak, on his RealMoney.com blog. He said that household and business debts are tied to the prime rate, which in turn is pegged to the target fed funds rate. As such, a reduction in the target rate would still have an impact, he wrote.

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