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Fed rate decision due at 2:00 p.m. ET

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Intuitive Machines ( LUNR ) soars after clinching NASA contract

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Indexes down: Dow 0.24%, S&P 500 0.27%, Nasdaq 0.39%

(Updated at 12:04 p.m. ET/1604 GMT)

By Johann M Cherian and Purvi Agarwal

Sept 18 (Reuters) - Wall Street's main indexes slipped

in volatile trading on Wednesday ahead of the Federal Reserve's

highly anticipated first interest rate cut in more than four

years, with jitters over the magnitude of the reduction

dominating mood.

Borrowing costs have stayed at their highest levels in over

two decades since July 2023, when the central bank last hiked

interest rates by 25 basis points to between 5.25% and 5.50% to

combat inflation. But the focus recently has moved to a

moderating labor market.

At 12:04 p.m., the Dow Jones Industrial Average fell

101.36 points, or 0.24%, to 41,504.82, the S&P 500 lost

15.32 points, or 0.27%, to 5,619.26 and the Nasdaq Composite

lost 68.11 points, or 0.39%, to 17,559.95.

Eight of the 11 S&P 500 sectors slipped, although

healthcare edged up 0.1%.

The Russell 2000 index, tracking small caps, also

dipped 0.2%, while the CBOE Volatility index hit a

one-week high and was last up 1.53 points at 19.14.

Still, the benchmark S&P 500 and the blue-chip Dow

are trading just shy of their respective record highs

ahead of the Fed decision, expected at 2:00 p.m. ET.

Mixed economic indicators over the previous one month have

made investors nervous ahead of the least-predictable Fed

decision in years.

However, dovish commentary from present and former Fed

officials recently have led traders to price in 53% chances of a

bigger 50-basis-point reduction, according to the CME Group's

FedWatch tool.

Still, few analysts caution that an outsized move from

the central bank could spook markets as it would be more

inconsistent with how the Fed has begun prior easing cycles

outside of any brewing crisis.

Bets for a smaller 25-bps cut now stand at 47% compared with

36% a day ago. Comments from Fed Chair Jerome Powell at 2:30

p.m. ET will be on the radar for the central bank's stance on

the economy and prospects of further rate cuts this year.

If the Fed cuts by 50 bps instead of 25 bps, it will

skip reducing rates next month, said Erica Groshen, senior

economics adviser at Cornell University, adding that if it is

the other way round, the central bank will lift its "foot off

more rapidly" next month.

"Fortunately, things don't seem to be in a high degree

of flux like they were during the financial crisis or during

COVID when rapid movements were necessary to avoid disaster."

Stock options are pricing a 1.1% swing, in either direction,

for the S&P 500 after the Fed's verdict, according to options

analytics service ORATS.

Markets have rallied this year, with all three major indexes

setting record highs on prospects of lower interest rates as

inflation moderated and the jobs market showed gradual signs of

cooling.

Heavyweight growth stocks such as Apple ( AAPL ) climbed

1.4%, while Alphabet dipped 0.29% and Microsoft ( MSFT )

lost 1%. Treasury yields across the board inched

higher.

Intuitive Machines ( LUNR ) jumped 56% after clinching a

$4.8 billion navigation services contract from NASA.

Declining issues outnumbered advancers by a 1.52-to-1

ratio on the NYSE and by a 1.61-to-1 ratio on the Nasdaq.

The S&P 500 posted 18 new 52-week highs and no new lows,

while the Nasdaq Composite recorded 55 new highs and 44 new

lows.