Wednesday December 16th


Wall Street eyes more gains on Fed's crucial day

U.S. stock index futures indicated a higher open on Wednesday, with Dow futures up about 100 points in pre-market trading ahead of the expected Federal Reserve interest rate rise. The Fed kicked off its meeting Tuesday, and will release its post meeting statement Wednesday at 2 p.m. ET, followed by a press conference hosted by Fed Chair Janet Yellen at 2:30 p.m. The central bank is widely expected to raise the fed funds rate by a quarter point Wednesday, while emphasizing that the pace of tightening will be gradual. A hike would be the first since June 2006. "So, the conclusion of the final Federal Open Market Committee (FOMC) meeting for 2015 this evening looks set to finally bring lift-off for fed funds rate, with the likely 25 basis point hike to 0.25-0.50 percent set to be the first increase since 2006," said economist at Daiwa Capital Markets, Emily Nicol. "Expectations, however, are for a 'dovish tightening', with the post-meeting statement and updated economic forecasts set to signal the likelihood of a slow pace of further hikes going forward. Indeed, 'the dot-plots' of FOMC member views seem likely to see the median expectation for the fed funds rate at end-2016 pushed lower by 25 or 50bps from the range of 1.25-1.50 percent signaled in September, and the median expectations for future years pulled lower too," she added. Fed could pump some life into aging bull market. Housing starts rose 10.5 percent in November, while building permits rose 11 percent. Other data releases due before the Fed decision include Industrial Production and Capacity Utilization at 9:15 a.m. Flash Manufacturing PMI is also due at 9:45 a.m. Joy Global posted quarterly results before market open. FedEx and Oracle are due after the bell. U.S. stocks closed higher Tuesday, supported by stabilization in oil prices and high expectations for the first rate hike in nine years. In Europe, equities traded slightly higher ahead of the Fed rate decision. Asian markets climbed on Wednesday, taking cues from a strong finish on Wall Street. Major indexes in Australia and Japan tacked on more than 2 percent, while South Korea finished nearly 1.9 percent higher.The Chinese markets traded mostly higher in the afternoon The Shanghai Composite pared most of its morning gains but still closed up 6.7 points, or 0.19 percent, at 3,517. The smaller Shenzhen Composite finished higher at 15 points, or 0.68 percent, at 2,280. Oil fell on Wednesday on fresh evidence of growing global oversupply and as investors awaited the outcome of a U.S. Federal Reserve meeting where interest rates are likely to be raised, boosting the dollar and pressuring commodities. Brent was down 75 cents at $37.70. On Tuesday the contract closed up 53 cents at $38.45 a barrel in its first gain in eight days. Analysts are watching for any test of Brent's December 2008 low of $36.20, with a break below that level taking the benchmark to levels not seen since 2004. West Texas Intermediate crude futures were down 42 cents at $36.93 per barrel after rising more than $1 on Tuesday. It was supported by looming changes to legislation that are expected to enable exports of U.S. crude oil. Gold rose on Wednesday as expectations that the U.S. Federal Reserve will announce its first interest rate hike in nearly a decade were tempered by speculation it would hint at a slow pace for future rises. Gold prices have fallen 10 percent this year, largely on the back of speculation that U.S. rates will rise from record lows, lifting the opportunity cost of holding non-yielding bullion while boosting the dollar. They have recovered from near six-year lows this month, however, as attention switched from the timing of the first hike to the pace of future increases. Spot gold was up 0.4 percent at $1,064.76 an ounce, while U.S. gold futures for February delivery were up $2.70 an ounce at $1,064.30.