Since then, excitement has built about an announcement scheduled for Wednesday afternoon from the Federal Reserve. The unanimous expectation on Wall Street is that the Fed will cut the federal funds rate, which has been sitting in a range of 5.25 per cent to 5.50 per cent for more than a year.

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The general expectation on Wall Street is for the Fed to deliver a larger-than-usual cut of half of a percentage point on Wednesday, according to data from CME Group. But it’s not a certainty. Traders are still betting on a 35 per cent probability for a traditional-sized move of a quarter of a percentage point,

Economic reports released Tuesday did little to change those expectations. One said US shoppers spent more at retailers last month than expected. That’s an encouraging signal indicating strength for the heart of the US economy, but details underneath the surface may have been more discouraging. After ignoring automobiles and fuel, sales at US retailers last month were a touch weaker than economists expected.

“This data isn’t going to decide the issue for the Fed, one way or the other,” Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley, said about the size of Wednesday’s rate cut.

A separate report that came later in the morning said US industrial production returned to growth in August and was stronger than economists expected.

In the bond market, the 10-year Treasury yield rose to 3.64 per cent from 3.62 per cent late Monday. The two-year yield, which more closely tracks expectations for the Fed’s actions, rose to 3.59 per cent from 3.56 per cent.

With AP

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