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Greek, Fed Uncertainty Sullies Wall Street's Rally

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Lingering uncertainty over whether Greece will be able to obtain key rescue funds and an unwillingness to take positions a day ahead of a major monetary policy announcement by the Federal Reserve sapped Wall Street's momentum on Tuesday.

Today's Markets

The Dow Jones Industrial Average rose 7.7 points, or 0.07%, to 11,409, the S&P 500 slipped 2 points, or 0.17%, to 1,202 and the Nasdaq Composite fell 22.6 points, or 0.86%, to 2,590. The FOX 50 was off 0.39 point to 871.  

The Dow gave up a rally that had pushed the blue chips higher by as much as 150 points on Tuesday in fairly light trading ahead of what is expected to be a volatile day on Wednesday. Many sectors, which had been solidly higher much of the day, slipped into the red. Still, utilities like The Southern Company (SO) performed solidly.  However, materials shares like Alcoa (AA) struggled. 

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The markets made a swift turn on a report European inspectors would wait until early-October to make a decision on whether to provide Greece with another aid tranche, according to market participants 

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Greece has an enormous level of public debt, and required a bailout from the International Monetary Fund and European Union to avoid a bailout that analysts say could put the European financial system in peril.  In fact, then markets have made dramatic moves on developments in the euro zone debt crisis in recent months. 

Fed Stimulus: 'Not a Done Deal'

The Federal Reserve started its two-day monetary policy meeting on Tuesday.  The central bank is widely expected to commence another round of economic stimulus in light of stalling economic expansion in the U.S. and abroad.  

"Although not a done deal, we see a high probability that the Federal Open Market Committee ... will announce further easing steps at the conclusion of this week’s meeting," economists at Goldman Sachs wrote in a research note. 

Economists are expecting the Fed to embark on a program that has been widely dubbed "Operation Twist," wherein the central bank would sell short-term Treasury bonds and buy longer term ones, effectively lengthening the maturity of its balance sheet . 

The Fed's final decision is expected at roughly 2:15 p.m. ET on Wednesday.

Italian Debt Woes

Standard & Poor's slashed Italy's sovereign debt rating by one notch to "A," in a move that came earlier than expected.  The ratings company cited a weakening political and economic environment in its decision to make the move.  Additionally, S&P kept its outlook at negative, meaning another downgrade could be on the horizon for Europe's third-largest economy.

Despite European markets largely shrugging off the move, economists that focus on Europe have said this is yet another setback for the currency bloc, which has been in the throes of a debt crisis for months. 

"Contagion risks (or the risk the crisis could spread to other countries) remain elevated, and the market's [skepticism] extends beyond Italy and now questions the survival of the euro area itself," economists at Barclays Capital wrote in a research note.

In currencies, the euro rose 0.07% against the U.S. dollar, while the greenback closed flat against a basket of world currencies. 

Energy futures were broadly higher, helped by a weakening dollar.  Light, sweet crude climbed $1.19, or 1.4%, to $86.89 a barrel.  Wholesale RBOB gasoline rose less than a penny to $2.70 a gallon. 

Gold jumped $30.20, or 1.7%, to $1,809 a troy ounce.  The yield on the benchmark 10-year Treasury note was up to 1.963% from 1.949%. 

Foreign Markets

The English FTSE 100 rose 2% to 5,364 and the German DAX jumped 2.9% to 5,572. 

In Asia, the Japanese Nikkei 225 slumped 1.6% to 8,721 and the Chinese Hang Seng ticked higher by 0.51% to 19,015. 

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