Stocks in the US are looking relatively flat heading into the open with investors having exhausted bullish enthusiasm for now after yesterday’s triple digit rally put the Dow 30 at a new intraday all-time high; investors are now sitting on their hands ahead of the release of inflation data and the latest Fed decision.
Futures suggest the Dow 30 will open 10 points higher at 17,141 with the S&P 500 expected to open 1 point higher at 1,999 and the NASDAQ Composite 4 points lower at 4,063.
The Wall St Journal reporter Jon Hilsenrath said in a webcast that he believed the central bank wouldn't alter its “considerable period time” language in its policy statement on Wednesday afternoon. He is known for his close ties and insider knowledge of the Fed.
A potential change in forward guidance was a major cause of the recent consolidation in US stock markets so if there is no change in policy language; it could trigger the next leg higher in the bull market.
The US consumer price index is expected to fall back to 1.9% while core prices are expected to remain flat at 1.9%.
The Fed and its Chair Janet Yellen have been taking a more neutral stance as of late and there has been one dissent to the use of the language “extended period of time” but this meeting may not prove to the one where the Fed need to make any bold changes.
The unemployment rate slipped back in August and only 142K jobs were created, industrial production weakened and if today’s inflation data shows a moderation then the pressure on the Fed to get more hawkish should if anything be abating.
There are other ways the Fed can enhance a more neutral stance though, the most obvious would be an increase in the forecasts for the level of the fed funds rate by year end of 2015, 2016 and now 2017.
The Fed could change some other language for example cut the drop the “significant underutilization of labor resources”, it could provide an update on an “exit strategy” for how it will end QE and Janet Yellen may also choose to tone down her dovish rhetoric in the press conference.
FedEx Corporation (NYSE:FDX) and General Mills Inc (NYSE:GIS) report earnings today before the open.
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