By Jennifer Coogan (Reuters)

U.S. stocks' steady climb since early August may end on Wednesday when the Federal Reserve issues its latest comments on the economy amid waning investor confidence that Fed policy-makers will soon be able to cut interest rates.

Since Aug. 8, when the Fed first left interest rates untouched for the first time after 17 straight hikes, the Nasdaq Composite Index has risen almost 14 percent. The Standard & Poor's 500 index and the Dow Jones industrial average are both up more than 8 percent, defying expectations of a rocky September.

But the sharp rally of the past 11 weeks may prove to be a mixed blessing even if the Fed decides to leave interest rates unchanged at the October meeting, and interest rate futures show that investors expect they will.

"This market rally has really been built upon the fact that investors perceive the Fed is done (raising rates), and if that's not the case or investors perceive that not to be the case, I think you're certainly going to have a bit of a pullback," said Bruce Zaro, chief technical strategist at Delta Global Advisors in Plymouth, Massachusetts.

"I would expect them to still pause but I would expect the language to be more hawkish," Zaro said.

Already, a growing minority believe policy-makers are not going to cut interest rates in the near term. Fed funds futures implied an 18 percent chance of a rise in January, while a month ago they had priced in as many as three quarter-percentage point rate cuts next year.

Any signal in the statement accompanying Wednesday's rate decision that the Fed believes inflation has not yet peaked could send stocks down, and the fall may be steeper given the market's recent sharp gains.

"The market's in an almost no-win situation," said Michael Metz, chief investment strategist at Oppenheimer & Co. in New York. "All the good is already in the market, and no disappointments have been discounted."

If the Fed statement's language is skewed to the hawkish side, it could have a bigger-than-normal impact because investors have been trading off of earnings results. Wednesday's interest rate announcement comes amid a barrage of quarterly updates -- of the 500 Standard & Poor's companies, 38 are set to report earnings on Wednesday. But a word of warning from the Fed could overshadow robust profit outlooks.

If the central bank's statement "has got any meaning to it, it will instantly affect the bond market, which will flow to the stock market, so even equity investors who have their heads buried in earnings, they'll feel it," said Rick Campagna, portfolio manager at Provident Investment Council in Pasadena, California.