Traders hope for a September rate cut signal

The three major averages were higher just after 1:50 p.m. ET.

The S&P 500 advanced 1.57%, while the Nasdaq Composite gained 2.36%. The Dow Jones Industrial Average rose 279 points, or 0.69%.

–Darla Mercado

Bond yields have come a long way down, even as the Federal Reserve has stood pat on interest rates.

Ahead of the Federal Reserve’s July rate decision, the yield on the 10-year Treasury note slid to about 4.11%, its lowest level since March 12 when it was 4.081%. Though that is just a three basis-point decline on the day, it is a far cry from last October when the benchmark yield touched 5% — a first since 2007.

The 2-year Treasury yield also hovered around 4.36%, little changed on the day. Back in April, however, the rate on this note topped 5%, spurred by worries over labor costs.

Investors who have been holding onto these risk-free bonds have been capturing attractive income since the Federal Reserve has kept rates high. Bond yields and prices have an inverse relationship. However, as bond yields fall, investors can expect to see price appreciation from that corner of their portfolio.

— Darla Mercado, Gina Francolla

Investors are looking past the Federal Reserve’s policy decision for July, instead fixing their gaze on the central bank’s outlook for rate cuts.

The Fed is widely expected to keep a steady hand on interest rates at the conclusion of its meeting on Wednesday, keeping its benchmark rate at a range of 5.25% to 5.5%, where they have been for the past year.

Traders will turn toward the central bank’s postmeeting statement and listen closely to Fed Chair Jerome Powell’s press conference for details on whether rate cuts can start in September. Indeed, fed funds futures trading suggests a 100% likelihood that policymakers will ease on rates at that meeting.

Read more from CNBC’s Jeff Cox on what investors should look for at the end of Wednesday’s meeting.

— Darla Mercado