U.S. Stocks May Continue To Lack Direction Ahead Of Fed Announcement

After ending the previous session little changed, stocks may continue to show a lack of direction in early trading on Tuesday. The major index futures are currently pointing to a roughly flat open for the markets, with the Dow futures up by just 5 points.

Traders may continue to stick to the sidelines as they await the Federal Reserve’s highly anticipated monetary policy announcement on Wednesday.

While the Fed is widely expected to leave interest rates unchanged, traders will pay close attention to the accompanying statement and the central bank’s projections for clues about the outlook for rates.

CME Group’s FedWatch Tool is currently indicating a 99.0 percent chance the Fed will leave rates unchanged this week, but the outlook for the November meeting is somewhat more mixed.

The FedWatch Tool is indicating a 69.0 percent chance rates will remain unchanged in November but a 30.7 percent chance of another quarter point rate hike.

“How the Fed delivers the pause is crucial for November and December rate expectations, but whether it’s presented with a dovish or hawkish tilt is what matters most for financial markets,” said Quincy Krosby, Chief Global Strategist for LPL Financial. “The Fed, and Fed Chair Powell particularly, will emphasize that they remain data dependent.”

She added, “Financial markets are even more keenly data dependent, and the wrapping of the pause, with a dovish or hawkish angle, is key for the market’s direction.”

In U.S. economic news, the Commerce Department released a report showing a sharp pullback in U.S. housing starts in the month of August, although the report also showed a spike in U.S. building permits.

The report said housing starts plunged by 11.3 percent to an annual rate of 1.283 million in August after jumping by 2.0 percent to a revised rate of 1.447 million in July.

Economists had expected housing starts to decrease to an annual rate of 1.440 million from the 1.452 million originally reported for the previous month.

Meanwhile, the Commerce Department said building permits surged by 6.9 percent to an annual rate of 1.543 million in August after inching up by 0.1 percent to a revised rate of 1.443 million in July.

Building permits, an indicator of future housing demand, were expected to rise to an annual rate of 1.445 million from the 1.442 million originally reported for the previous month.

Following the volatility seen to close out the previous week, stocks turned in a relatively lackluster performance during trading on Monday. The major averages spent the day bouncing back and forth across the unchanged line.

The major averages eventually ended the session slightly higher. While the S&P 500 edged up 3.21 points or 0.1 percent to 4,453.53, the Dow inched up 6.06 points or less than a tenth of a percent to 34,624.30 and the Nasdaq crept up 1.90 points or less than a tenth of a percent to 13,710.24.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan’s Nikkei 225 Index slid by 0.9 percent, while China’s Shanghai Composite Index closed just below the unchanged line.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the German DAX Index is down by 0.3 percent, the U.K.’s FTSE 100 Index is marginally higher and the French CAC 40 Index is up by 0.1 percent.

In commodities trading, crude oil futures are jumping $1.20 to $92.68 a barrel after advancing $0.71 to $91.48 barrel on Monday. Meanwhile, after rising $7.20 to $1,953.40 an ounce in the previous session, gold futures are inching up $3.20 to $1,956.60 an ounce.

On the currency front, the U.S. dollar is trading at 147.75 yen compared to the 147.61 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0703 compared to yesterday’s $1.0692.

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