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Fed's Waller flags risk of inflation going too low

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FedEx ( FDX ) falls on quarterly profit drop, forecast trim

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Nike ( NKE ) jumps after appointing new CEO

(Updated at 4 p.m. ET/2000 GMT)

By Chuck Mikolajczak

NEW YORK, Sept 20 (Reuters) - U.S. stocks closed nearly

unchanged on Friday, as investors paused buying after a strong

rally in the prior session that was fueled by an upsized

interest-rate cut by the Federal Reserve, while Nike's ( NKE ) gains

helped nudge the Dow to a record.

After notching their biggest daily percentage gains since

mid-August, major averages were subdued for most of the session,

but managed to secure weekly gains of at least 1%.

Stocks briefly had pared losses after comments from Fed

Governor Christopher Waller increased expectations the central

bank will cut interest rates by 50 basis points at its November

meeting, having just cut by 50 bps on Wednesday.

Fellow Governor Michelle Bowman, however, maintained that a

smaller Fed cut this week would have been preferred.

"The market is still trying to recalibrate because, yes,

there were some market participants that may have expected 50

basis points but a lot of people didn't," said Sid Vaidya, U.S.

chief wealth strategist at TD Wealth in New York.

"You have to be a little bit more selective and measured

just because we are expecting growth to slow down a little bit

and valuations, especially in large-cap growth, are a bit

stretched so you want to be a bit selective."

According to preliminary data, the S&P 500 lost 10.27

points, or 0.18%, to end at 5,703.37 points, while the Nasdaq

Composite lost 65.66 points, or 0.36%, to 17,948.32. The

Dow Jones Industrial Average rose 37.62 points, or 0.09%,

to 42,062.81.

Markets are fully pricing in a cut of at least 25 bps in

November, with expectations for a cut of 50 bps given a 48.9%

chance, according to CME's FedWatch Tool.

Utilities surged as the best performing of the 11

major S&P sectors, led by a jump in Constellation Energy ( CEG )

shares after the company signed a data-center deal with

Microsoft ( MSFT ) to help resurrect a unit of the Three Mile

Island nuclear plant in Pennsylvania.

Also supporting the Dow was Intel ( INTC ), whose shares

gained ground late after the Wall Street Journal reported

Qualcomm ( QCOM ) had made a takeover approach to the chipmaker.

The Fed began its monetary-easing cycle on Wednesday and

projected a period of steady economic growth and low

unemployment and inflation.

Options and futures linked to stock indexes and individual

stocks were set to expire simultaneously on Friday in an event

known as "triple witching."

FedEx ( FDX ) plunged after lowering its full-year revenue

forecast, sending the Dow Jones Transport index down.

Nike ( NKE ) climbed after saying former senior executive

Elliott Hill will rejoin the company to succeed John Donahoe as

CEO.

Historically, equities have performed well in a rate-cutting

environment. However, the outlook appears bleak with the S&P

500's valuations high above its long-term average.