Fed vigil begins
Futures markets point to positive open
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 8:11 AM ET Aug 22, 2000 NewsWatch
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NEW YORK (CBS.MW) - The day's action is likely to be both directionless and anemic ahead of the Federal Reserve's decision on interest rates Tuesday. An announcement is widely expected to hit screens at around 2:15 p.m.
Market participants appear certain in their view that the central bank will again opt to stand pat on rates. The Fed's last tightening move dates back to May 16 - when the central bank struck with a 50-basis-point hike, taking the fed funds rate target to a 9-year high. See Fed preview.
In the futures markets, September S&P 500 futures added 1.70 points and were trading approximately 2.80 points above fair value. Nasdaq futures eked out a small gain of 11.50 points, or 0.3 percent.
The market's debate centers on how the Fed will word the statement released at the conclusion of the gathering. At the June 27-28 FOMC meeting, the central bank said economic risks remained weighted toward inflation pressures.
Over the past six weeks, however, evidence that economic growth is tapering off has mounted. Still, the consumer remains strong and growth is cooling off from very high levels.
Fed funds futures -- which measure the market's rate expectations going forward - indicate a 50-50 chance of another rate hike before the current tightening cycle concludes.
In the Treasury market, action was again muted with traders opting to sit on the fence until the outcome Tuesday afternoon of the Fed meeting.
There is no economic news due out Tuesday. The week's reports are primarily second-tier in nature, including durable goods orders for July. View Economic Preview, economic calendar and forecasts and historical economic data
The 10-year Treasury note added 2/32 to yield ($TNX: news, msgs) 5.77 percent and the 30-year bond climbed 3/32 to yield ($TYX: news, msgs) 5.705 percent.
Short-dated issues - the most sensitive to changes in the fed funds rate -- also traded a sliver higher. On the supply front, Treasury will auction $10 billion in 2-year notes on Wednesday. A 2-year issue is currently yielding 6.27 percent - 23 basis points less then the current fed funds target.
In the currency arena, dollar/yen (C_JPY: news, msgs) dipped 0.3 percent to 108.35 while euro/dollar (C_EUR: news, msgs) continued its descent, moving to 0.8984, off 0.4 percent. See latest currency rates.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
