The Day Ahead: Fed Under the Microscope

 | Aug 30, 2011 | 8:28 AM EDT  | Comments
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In the Headlines

Wall Street appeared headed for a lower open Tuesday, following Monday's big percentage gains in below-average volume on the major indices. Stocks rallying in heavy trade is often a stronger indication of investor confidence. Volume was muted yesterday because many traders stayed home in the aftermath of Hurricane Irene. In addition, volume is often low in the sessions leading up to the Labor Day holiday.

With the Federal Reserve under the microscope lately, traders are awaiting the minutes from the Federal Open Market Committee's (FOMC) most recent meeting, which are due out later today. The document will be scrutinized for details of the dissent between Ben Bernanke and other members of the committee, including Dallas Fed President Richard Fisher. He and others did not back the pledge to keep interest rates at zero through 2013.

European stocks were trading mixed before Wall Street's open. Financials and miners were among leaders the leaders. In Greece, government finance officials are meeting today with representatives of the International Monetary Fund (IMF), European Central Bank (ECB) and European Union (EU) to hammer out details of its bailout deal. Finland has proposed that Greece provide collateral in exchange for further loans. The euro was trading lower against the dollar early Tuesday.

Banks and resources-related stocks were also big gainers in Asian trade. The region's major indices ended mostly higher Tuesday. In Japanese trade, techs and automakers also boosted the Nikkei, which finished 1.16% higher. Before the opening bell on Wall Street, China's yuan rallied to an all-time high vs. the greenback.

Commodities Corner

Gold, which has pulled back from last week's $1,900 level, advanced Tuesday morning, to $1,794.70 per ounce, a gain of $3.10. Crude prices slumped $0.25, to $87.02 per barrel in early Nymex trade. 

Economic Docket

In today's economic news, the S&P/Case-Shiller Home Price Index for long-ago June is due out at 9 a.m. EDT. Economists expect the reading to be unchanged from May's poor reading.

The Conference Board is scheduled to release its data on August Consumer Confidence at 10 a.m. Analysts anticipate a sizable drop, to 52, from July's reading of 59.5. The FOMC minutes are due out at 2 p.m. EDT.

Earnings on Tap

Corporate earnings for today include discounter Dollar General (DG), which earned $0.52 per share on sales of $3.58 billion in the second quarter. Results came in ahead of top- and bottom-line views. The company also raised its full-year same-store sales outlook.

The stock, which made its NYSE debut in November, 2009, has been consolidating price gains since retreating from a high of $35.09 in late May. Having regained their 50-day moving average, the shares closed at $33.79 on Monday.

Reporting after the bell is clothing maker Phillips Van Heusen (PVH). Its brands include Calvin Klein, Tommy Hilfiger and Izod. The New York-based mid-cap is expected to earn $0.95 a share on revenue of $1.28 billion. Those would mark year-over-year increases.

Early Movers

Early price movers Tuesday included, once again, Bank of America (BAC) -- there seems to be major news about this name every day. The latest is that regulator FDIC is objecting to Bank of America's proposed $8.5 billion settlement with investors of mortgage bonds. FDIC is among the owners because it took over some failed banks that were investors in the bonds. BAC was down $0.09 on Monday, which, in a low-priced stock, works out to a loss of 1.07%, to $8.30.

Starbucks (SBUX) is a premarket gainer as it has advanced a nickel, or 0.13%, to $38.10. The company said that its K-Cups for Keurig single-serving units would available on store shelves in November. The announcement has been anticipated since March, when Starbucks inked a deal with Keurig maker Green Mountain Coffee Roasters (GMCR).

Analyst Action

DJIA component Boeing (BA) got some lift after Nomura upgraded its stock to Neutral from Reduce. Boeing is set to give an update today on plans to revamp its 737 line of aircraft. In the face of heightened competition from Europe's Airbus, Boeing is going with a "re-engining" plan, rather than a full update.

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