The big day has arrived. The Federal Reserve is expected to announce its latest monetary policy decision. Traders across Wall Street expect the Fed to lower rates, ending the tightening cycle that began in March 2022. That said, investors aren’t sure how big the rate reduction will be. The CME Group’s FedWatch tool shows there’s a 65% probability of a half percentage point cut. However, traders are hedging their bets. “The most interesting options trades [Tuesday] appeared to be fading a 50bps cut and hedging in cause of a 25bps cut disappointment,” wrote Chris Murphy of Susquehanna. “This doesn’t necessarily mean the actors behind this trades expect a 25bps cut; they might just think it has a greater than 30% chance and are hedging longs or lightening positions.” The announcement comes a day after the S & P 500 hit an intraday record of 5,670.81 — essentially completing a recovery from a late-summer pullback that nearly sent the benchmark into a correction. To be sure, it closed more than 30 points below the closing all-time high of 5,634.58 set in July. .SPX YTD mountain SPX year to date BTIG chief market technician Jonathan Krinsky thinks the market is in a tough spot heading into the decision. “There are some viewpoints that it doesn’t matter if they go 25 or 50, as long as the dot plot shows 100bps by year-end. We tend to agree with that, but also think the setup for a ‘false breakout’ remains high,” wrote Krinsky. “It’s also highly unusual to be this close to a meeting with this much uncertainty.” One thing investors can likely count on is volatility. In the 20 Fed meetings since began it rate hiking campaign, the S & P 500 has posted a dozen moves of at least 1%. That includes four swings of more than 2%. Bottom line: Investors should tread carefully into the announcement. Elsewhere on Wall Street this morning , Barclays upgraded VF Corp to overweight from equal weight. “We believe the risk-reward is attractive at current levels. We believe we will begin to see incremental sequential improvement in company fundamentals over the next four to six quarters beginning modestly in the fall season of 2024,” analyst Adrienne Yih wrote.