Financial Markets                      09/16 13:00

   

   NEW YORK (AP) -- U.S. stock indexes are drifting near their records Monday 
as Wall Street gears up for the most anticipated meeting of the Federal Reserve 
in years.

   The S&P 500 was 0.1% lower in afternoon trading after flitting between gains 
and losses earlier in the morning. It's sitting just 0.8% below its all-time 
high set in July.

   The Dow Jones Industrial Average was up 134 points, or 0.3%, as of 12:51 
p.m. Eastern time, after climbing above its record closing high earlier in the 
day. The Nasdaq composite was down 0.9%.

   Oracle rose 6.2% to help lead the market, continuing a strong run that began 
last week with a better-than-expected profit report. Alcoa also jumped 8% after 
saying it would sell its ownership stake in a Saudi Arabian joint venture to 
Saudi Arabian Mining Co. for $950 million in stock and $150 million in cash. 
But drops for some influential Big Tech stocks dragged on indexes, including 
declines of 3.1% for Apple and 2.5% for Nvidia.

   Treasury yields eased in the bond market ahead of what's expected to be the 
week's main event. On Wednesday, the widespread expectation is for the Federal 
Reserve to cut its main interest rate for the first time in more than four 
years to deliver some relief to the economy.

   The only question is by how much the Fed will cut. Traders are shifting more 
bets toward a larger-than-usual move of half a percentage point, according to 
data from CME Group. They're anticipating a 59% chance the Fed will go beyond 
the more traditional cut of a quarter of a percentage point. That's up from 50% 
on Friday and just 30% a week ago.

   The difference between a half-point cut and a quarter may sound academic, 
but it can have far-ranging effects. While lowering rates relieves pressure on 
the economy, it can also give inflation more fuel.

   The Federal Reserve has been keeping its main interest rate at a two-decade 
high in hopes of slowing the economy enough to stifle high inflation. With 
inflation having eased substantially from its peak two summers ago, the Fed has 
said it can turn more focus to bolstering the slowing job market and economy. 
Some critics say it may be moving too late, increasing the risk of a possible 
recession.

   A Fed cut of half a percentage point would likely be the best case for the 
stock market in the very short term, according to Michael Wilson and other 
strategists at Morgan Stanley. But that's only if the Fed can convince 
investors it's not getting forced into a bigger-than-usual cut because of 
worries about a recession, among other factors.

   Still, the more important thing for where stocks are heading over the next 
three to six months will be how well the job market holds up, according to 
Wilson. If employment weakens, stocks could fall regardless of whether the Fed 
cuts by half or a quarter of a percentage point on Wednesday.

   In the bond market, the yield on the 10-year Treasury edged down to 3.63% 
from 3.66% late Friday. The two-year yield, which moves more closely with 
expectations for the Fed, eased to 3.55% from 3.59%.

   That was despite a report in the morning showing manufacturing in New York 
state returned to growth in September. That surprised economists, who were 
expecting another month of contraction for an area of the economy that's been 
hit hard by high interest rates.

   On Wall Street, Carl Icahn's Icahn Enterprises rose 8.5% after it said a 
U.S. judge dismissed a proposed class-action lawsuit against the company, one 
based on allegations by a research firm that looks for financial irregularities 
and tries to profit when the stock prices fall.

   Fertilizer producer Mosaic fell 4.9% after it said electrical equipment 
failures at mines and Hurricane Francine will reduce its production of potash 
and phosphate in the current quarter.

   In stock markets abroad, indexes were mixed amid mostly modest movements 
across Europe and Asia. Hong Kong's Hang Seng added 0.3% after data released 
over the weekend showed China's economy slowed further in August.

   Markets in Japan, mainland China and South Korea were closed for holidays.

   ___

   AP Writers Matt Ott and Zimo Zhong contributed.

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