There is a clear message this morning that the market's main concern is today's policy announcement from the Federal Open Market Committee (FOMC). How do we know? The answer lays in the futures market, which is little changed despite a rash of news with a disappointing or worrisome bent.
- FedEx (FDX), Adobe Systems (ADBE), Bed Bath & Beyond (BBBY), and General Mills (GIS) all disappointed with their latest earnings reports and/or outlook
- Ford (F) said it will temporarily idle production at five North American plants to combat rising inventory levels for slower-selling cars
- 3M (MMM) was downgraded by JPMorgan Chase to Underweight from Neutral while Goldman Sachs cut its rating on Johnson & Johnson (JNJ) to Sell from Neutral
- Mortgage applications declined 9.7% last week
- Hurricane Maria is beating down on Puerto Rico as a Category 4 storm; and
- Sadly, Mexico City and other parts of Mexico are digging out from the ravages of a 7.1 earthquake that has claimed the lives of more than 200 people
Where do the S&P futures sit in the wake of this news? They are up 0.25 points. The Nasdaq 100 futures are down two points and the Dow Jones Industrial Average futures are down six points.
In other words, the stage is set for a flattish open for the cash market which will be confronted with the Existing Home Sales report for August at 10:00 a.m. ET and the weekly oil inventory report from the Department of Energy at 10:30 a.m. ET.
Oil prices happen to be up 1.0% at the moment to $49.98 per barrel. Supportive influences have included the weaker dollar, a smaller than expected inventory build reported by the American Petroleum Institute, and reports that Iraq could be open to an extension, or increase, of the OPEC supply cuts.
Treasury yields, meanwhile, are holding pretty steady. The 2-yr note yield is unchanged at 1.39% and the 10-yr note yield is down one basis point at 2.23%.
Those steady performances make plenty of sense, as traders aren't going to make any outsized bets directly in front of what is expected to be a market-moving FOMC meeting.
The FOMC decision will be announced at 2:00 p.m. ET and Fed Chair Yellen's press conference to discuss the decision and the updated economic and policy rate path projections will follow at 2:30 p.m. ET.
Based on a number of previews of the FOMC meeting, the market generally expects no rate hike and an announcement that the balance sheet normalization process will start in October.
The main pocket of uncertainty -- and the potential element of surprise -- is what the Fed's economic and policy rate path projections will reveal. In particular, will there be any revision to the number of rate hikes projected for 2017 (currently three) and/or to the longer-run fed funds rate (currently 3.0%)?
That answer to those questions is where the potential market-moving impact of the FOMC meeting is centered.