US STOCKS-Wall St falls as Fed signals smaller rate cut

* Fed expected to cut interest rates by 25 basis points
* Kansas City Southern gains on profit beat
* American Express falls as expenses rise
* Indexes down: Dow 0.25%, S&P 500 0.62%, Nasdaq 0.74%

(Updates to market close)
By Evan Sully and April Joyner
NEW YORK, July 19 (Reuters) - Wall Street's main indexes
fell on Friday following a report that the Federal Reserve plans
to cut interest rates by only a quarter-percentage point at the
end of the month.
The benchmark S&P 500 erased earlier marginal gains after a
Wall Street Journal report on the Fed's plans. According to the
report, while the U.S. central bank is not prepared to make a
bigger 50-basis-point cut, it may make further rate cuts in the
future given concerns about a decline in global economic growth
and uncertainty about trade. On Thursday, stocks had risen as comments from New York Fed
President John Williams increased hopes of a bigger rate cut.
Later that day, however, a New York Fed representative said
Williams' comments were not intended to telegraph any hints
about upcoming Fed policy actions. "It appears that the Fed has communicated its message," said
Bucky Hellwig, senior vice president at BB&T Wealth Management
in Birmingham, Alabama. "They're basically trying to clarify
their policy."
Futures market odds of a 50-basis-point cut at the Fed's
July meeting soared to 71% late Thursday immediately after
Williams' speech but fell to 22.5% on Friday, according to CME
Group's Fedwatch tool.
The expiration of options on Friday likely amplified the
market reaction to the report, said Dennis Dick, head of markets
structure at Bright Trading LLC in Las Vegas.
"It's been one of those days where you get a lot of chop,"
he said. "This is often on the third Friday of the month. The
traders are expecting this."
The Dow Jones Industrial Average .DJI fell 68.77 points,
or 0.25%, to 27,154.2, the S&P 500 .SPX lost 18.5 points, or
0.62%, to 2,976.61 and the Nasdaq Composite .IXIC dropped
60.75 points, or 0.74%, to 8,146.49.
For the week, the Dow lost 0.64%, the S&P fell 1.23% and the
Nasdaq shed 1.19%.
Earlier on Friday, U.S. stocks had edged higher as strong
results from Microsoft Corp MSFT.O momentarily buoyed
technology stocks. Microsoft shares ended marginally higher, up
0.1%, but the S&P 500 technology index .SPLRCT fell 0.55%.
Second-quarter profits at S&P 500 companies are now
estimated to rise 1%, according to Refinitiv IBES data, in a
reversal from earlier expectations of a small drop.
Boeing Co BA.N shares gained 4.5%, despite the
planemaker's disclosure that it would take a $4.9 billion
after-tax hit from the grounding of its 737 MAX, indicating that
investors had expected more severe repercussions. Kansas City Southern KSU.N shares rose 4.6% after the
railroad operator posted a better-than-expected quarterly
profit. Its shares helped the Dow Jones Transport index .DJT
gain 0.6%.
Shares of American Express Co AXP.N slipped 2.8% after the
credit card issuer warned of higher operating costs this year as
it spends heavily on rewards programs to attract customers.

Declining issues outnumbered advancing ones on the NYSE by a
1.29-to-1 ratio; on Nasdaq, a 1.51-to-1 ratio favored decliners.
The S&P 500 posted 45 new 52-week highs and five new lows;
the Nasdaq Composite recorded 75 new highs and 84 new lows.
Volume on U.S. exchanges was 6.25 billion shares, compared
to the 6.59 billion average for the full session over the last
20 trading days.