Stock Futures Inch Higher as Fed Meets for Policy Decision on Balance Sheet
New York (Sept 19) Stock futures inched higher on Tuesday, Sept. 19, putting markets on track for records again as the Federal Reserve met to discuss monetary policy.
Dow Jones Industrial Average futures were up 0.08%, S&P 500 futures added 0.08%, and Nasdaq futures increased 0.1%.
A generally upbeat mood gave stocks rise on Monday, Sept. 18, and pushed the S&P 500 and Dow Jones Industrial Average to new heights. The S&P 500 traded above its 2,500 milestone and set a record high for its second day in a row. The Dow settled at records for day five. The Nasdaq missed out on its own record close.
The monetary-policy arm of the Fed, the Federal Open Market Committee, will meet on Tuesday for two days with an announcement on Wednesday, Sept. 20. Fed Chair Janet Yellen will hold a press conference Wednesday afternoon.
Investors don't expect many surprises. Markets have given a near-zero chance of a change to U.S. interest rates, but near-certainty to the Fed beginning to unwind its $4.5 trillion balance sheet, a process it previously said it would begin "relatively soon."
"If the signals are right then this week should mark the point when the ... Fed finally begins the long-overdue process of unwinding its bloated balance sheet," said Aberdeen Standard Investments investment manager James Athey. "That would make it a milestone in the post-crisis monetary experiment.
He added, "Inching us out of this parallel universe of endless liquidity is going to be a fraught process. No one's done it before so no one can credibly claim to know what will happen. We are very early on in the process but, so far, financial markets have largely remained unmoved and unencumbered by the prospect of falling, as opposed to endless, liquidity."
Wall Street is confident there will be no change to the federal funds rate at the meeting this month -- future price in a 100% chance that the rate will hold at 1% to 1.25%, according to the CME Group. Fed funds futures are currently pricing in a nearly 61% chance of a 25-basis-point increase at the December meeting, putting the federal funds rate at 1.25% to 1.5%.
President Donald Trump will address the U.N. General Assembly on Tuesday in what is expected to be a speech outlining strategy in dealing with North Korea. The authoritarian country has conducted a number of missile tests in recent weeks, with two of the devices flying over Japan, and has threatened to bomb U.S. territory Guam. The North Korea threat has unsettled markets since it again cropped up in early August.
On the economic calendar Tuesday, housing starts and import and export prices for August will both be released before markets open.
AutoZone Inc. (AZO - Get Report) rose nearly 5% in premarket trading following a better-than-expected fourth quarter. The car parts retailer earned $15.27 a share over the three-month period, up from $14.30 a year earlier. Adjusted earnings of $5.18 a share beat estimates by 7 cents. Revenue increased by 3.3% to $3.51 billion, edging out estimates of $3.49 billion. Domestic same-store sales increased 1%, falling short of an expected 1.6% rise.
Steelcase Inc. (SCS - Get Report) added more than 5% after exceeding earnings consensus over its recent quarter. Second-quarter net income was flat at 31 cents a share, but beat estimates of 23 cents. Revenue increased just over 2% to $775.6 million, but came in short of expectations for $757.4 million. Third-quarter guidance also came in lower than estimated -- the company anticipates 21 cents to 25 cents a share, below a targeted 28 cents.
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