The Day Ahead: Looking to the Fed

 | Sep 20, 2011 | 8:28 AM EDT  | Comments
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In the Headlines

Hope surrounding a possible Federal Reserve portfolio shift and a Greek conference call boosted Wall Street futures Tuesday.

Early upside trade in U.S. equities followed a higher open in Europe, despite Standard & Poor's (S&P) downgrade of Italy's debt yesterday.

Traders are expecting that part two of a phone call between Greek financial officials and its three big creditors will result in a bailout deal and avoid a Greek default -- for now, anyway. After no resolution yesterday, the phone meeting between Athens and the European Union, International Monetary Fund and European Central Bank is slated to resume today. Optimism about that meeting sent European stocks higher, with traders shrugging off S&P's demotion of Italy's credit rating.

Asian markets ended mixed, with S&P's move putting a dent in stocks. Japan's Nikkei reopened after Monday's holiday (the country's Respect-for-the-Aged Day), and posted a loss of 1.61%. Throughout the region, stocks of companies with large European exposure were among decliners.

Fed Watch

Back home, the Federal Open Market Committee (FOMC) begins Day 1 of a two-day session. Fed watchers anticipate that the central bank will attempt to boost investment spending via a move dubbed "Operation Twist." It would involve shifting the balance of securities within its portfolio by selling some short-term debt and buying longer-term instruments.

The traditional FOMC post-meeting statement is due out tomorrow, giving pundits plenty of time to speculate about the central bank's potential moves.

Housing and Commodities

In other economic news, it's all about housing today. At 8:30 a.m. EDT, the Commerce Department will release data on housing starts and building permits for August. The numbers are expected to show a drop from July's numbers.

Copper, which plunged Monday, advanced $0.029 in electronic trading, to $3.81 per pound. Gold has been trending lower recently, but rebounded early Tuesday, gaining $12.30 per ounce to $1,791.20. Crude oil rose $0.74 to $86.22 per barrel.

Earnings

Today's earnings news includes a fourth-quarter report from retailer AutoZone (AZO), which reported income of $7.18 per share and revenue of $2.64 billion, beating top- and bottom-line views. Analysts had expected $6.97 per share on sales of $2.61 billion.

After the bell is a third-quarter report from graphics software maker Adobe (ADBE), seen earning $0.54 a share on revenue of $1.03 billion.  That would be no change in per-share income on a year-over-year basis, but an increase in revenue. In the past three quarters, the pace of revenue growth has been slipping. The stock is down nearly 18% so far this year.

Enterprise software maker Oracle (ORCL) is also due out late today with first-quarter results. Wall Street expects per-share income of $0.47 on revenue of $8.36 billion. Analysts will be eyeing results from the company's server business, following last year's acquisition of Sun Microsystems.

Early Movers

Premarket movers today included DJIA component IBM (IBM), which said it would smooth the path for rivals to provide maintenance service for its gear. The concession is aimed at securing approval from European Union regulators to end an antitrust investigation. IBM shares rose $0.55, 0.32%, to $173.68 before the open.

Oil-and-gas explorer and producer Range Resources (RRC) continued its upward trajectory, gaining $1.17, 1.78%, to $67 in the premarket. The stock climbed 3.8% on Monday in more than triple average volume. It cleared a seven-week price consolidation, but pulled back to finish below its previous three-year high of $67.33, which it reached in early August.

Analyst Actions

U.K.-based semiconductor company Arm Holdings (ARMH) was upgraded to Buy from Hold at Benchmark, which cited valuation, as well as momentum in graphics processing technologies.  Arm, which is a supplier to Apple (AAPL), saw its shares rise $0.33 in early trading, a gain of 1.17%, to $28.57.

Also getting an upgrade was clothing maker and retailer Polo Ralph Lauren (RL), boosted to Outperform from Neutral at Cowen. The analyst said the move was based on international expansion and improved profit margins. The shares rallied to an all-time high of $151.70 on Monday.

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