‘Hawkish’ Rate Cut Is What Wall Street Expects. It’s a Challenge to Equities Through Year-End.

Bond investors have been making big bets on the direction of interest rates next year based on stubborn inflation pressures, soaring levels of government debt, and attacks on Federal Reserve independence that are rippling through major markets around the world. The adjustment has stoked a big move in yields, and, in turn, has held down gains for U.S. stocks heading into the Fed’s rate decision Wednesday and possibly over the final trading weeks of the year. Investors have been expecting a quarter-point rate cut from the Fed, which would lower its key lending rate to between 3.5% and 3.75%, but are paring bets on similar reductions over the first half of next year.