Thursday's Fed Decision To Set Tone Of Markets

(RTTNews) - The major U.S. index futures are pointing to a modestly lower opening on Monday, with sentiment reflecting the apprehensions remaining in the minds of traders as the Fed's D-day approaches. A 2-day FOMC meeting that gets underway on Wednesday could set the tempo for the week's trading. Ahead of the week, there are a few market moving reports on manufacturing, housing and retail sales that could provide further cues on the direction of monetary policy. The dollar is mixed and commodities are also showing subdued trading, while the mood across the Atlantic has turned sour after a positive opening.

U.S. stocks reversed course and advanced solidly in the holiday-shortened week ended September 11th, as a lack of gyrations in the Chinese equity markets and mixed expectations concerning a potential September rate hike triggered buying. The markets were closed on Monday on account of the Labor Day holiday.

Last Tuesday, the major averages advanced notably, as bargain hunting following the previous week's retreat helped the markets. Stocks took heart from a rebound by Chinese equities. Amid the absence of any major fundamental triggers, the major averages retreated notably on Wednesday.

Stocks rebounded moderately on Thursday even as domestic rate worries persisted. After a lackluster move for much of the session on Friday amid the release of a report showing faster than expected inflation, the averages advanced in the afternoon, ending moderately higher.

For the week ended September 11th, the Dow Industrials and the S&P 500 Index ended up 2.05 percent and 2.07 percent, respectively, while the Nasdaq Composite gained 2.96 percent.

Among the sectors, the NYSE Arca Biotechnology Index rallied 5.28 percent for the week, while Dow Jones Transportation Average, Philadelphia Semiconductor Index and the NYSE Arca Computer Hardware Index were all up over 3 percent. Additionally, the NYSE Arca Airline Index, the Philadelphia Housing Sector Index and the KBW Bank Index added over 2 percent each. On the other hand, the Philadelphia Oil Service Index and the NYSE Arca Gold Bugs Index fell 3.65 percent and 1.31 percent, respectively.

Currency, Commodity Markets

Crude oil futures are slipping $0.20 to $44.43 a barrel after retreating $1.42 or 3.08 percent to $44.63 a barrel in the week ended September 11th.

The commodity was stymied last week by tempered global growth expectations and the lowering of the oil price forecast by the International Energy Agency as well firms including Goldman Sachs.

Gold futures, which fell $18.10 or 1.61 percent to $1,103.30 an ounce in the previous week, are currently climbing $1 to $1,104.30 an ounce.

Among currencies, the U.S. dollar retreated against the euro in the week ended September 11th, dipping 1.50 percent before ending the week at $1.1338. The euro strength was based on reduced bets of a September rate hike. At the same time, the dollar rose 1.10 percent against the yen to 120.59 yen. The yen weakened last week after Prime Minister Shinzo Abe suggested he might implement a corporate tax rate cut.

The greenback is currently trading at 120.34 yen and is valued at $1.1307 versus the euro.

Asia

The major Asian markets ended mixed, with the Chinese and Japanese markets retreating notably. The South Korean and Singaporean markets also moved to the downside. On the other hand, the rest of the markets advanced amid hopes that some soft Chinese data released over the weekend has provided additional reasons for stimulus infusion.

The Japanese market succumbed to the weakness generated by a firmer yen. The Nikkei 225 Index opened higher but retreated immediately after. Moving sideways till the afternoon, the index plunged sharply in late afternoon trading before moving sideways yet again. At the close of trading, the index was down 298.52 points or 1.63 percent at 17,966.

Export stocks came under selling pressure. Meanwhile, some housing, glass, retail, rail, banking and utility stocks gained ground.

China's Shanghai Composite Index plunged 85.44 points or 2.67 percent before ending at 3,115.

At the same time, Australia's All Ordinaries Index held mostly above the unchanged line amid volatility before ending 24.20 points or 0.47 percent higher at 5,121. Most sectors advanced, led by utility, real estate, healthcare and financial stocks. However, energy and telecom stocks came under selling pressure. Hong Kong's Hang Seng Index added 57.53 points or 0.27 percent before ending at 3,115.

On the economic front, a trio of reports release by the Chinese National Bureau of Statistics on Sunday showed the questionable nature of the recovery. Industrial production rose 6.1 percent year-over-year in August, faster than the 6 percent rate in July but slower than the 6.3 percent growth expected by economists.

Fixed asset investment climbed 10.9 percent year-over-year in the January to August period, slower than the 11.2 percent growth expected by economists. Meanwhile, retail sales rose at a faster than expected rate of 10.8 percent.

Revised estimate released by the Ministry of Economy, Trade and Industry showed that industrial production fell 0.8 percent month-over-month in July, downwardly revised from the 0.6 percent drop estimated initially. Shipments also fell a steeper than initially estimated 0.4 percent. Annually, output remained unchanged following a 2.3 percent increase in June.

A separate report showed that the tertiary index, which reflects performance by the service sector, rose 0.2 percent in July following a 0.3 percent increase in the previous month.

Europe

European markets open higher and rallied sharply in early trading, as sentiment was buoyed by Chinese stimulus hopes. However, reflecting the cautious underlying mood ahead of Thursday's FOMC announcement, the averages have turned lower by the mid-session.

In corporate news, French insurer AXA announced the acquisition of an 18.6 percent stake in West African utility company Eranove from French conglomerate Bouygues. Reports suggest that Shire is contemplating to sweeten its $30 billion bid for U.S.-based Baxalta (BXLT), a spin-off unit of Baxter (BAX).

On the economic front, , provisional data from Eurostat showed eurozone industrial production grew a more-than-expected 0.6 percent month-over-month in July, marking the biggest gain in five months. Economists had expected a 0.3 percent gain. Annually, industrial production grew 1.9 percent in July, more than the 0.6 percent growth expected by economists and reflecting the strongest since March.

U.S. Economic Reports

Markets the world over are likely to be focused on one main economic event of the week, namely the 2-day FOMC meeting starting on Wednesday. With the markets putting the odds of a September rate hike at roughly 20 to 30 percent, Thursday's FOMC statement, updated Fed forecasts and the Chair's press briefing will likely be the most closely watched events of the week.

Some of the other noteworthy releases of the week include the Commerce Department's retail sales report for August, the Federal Reserve's industrial production report for August, the results of the New York Federal Reserve and the Philadelphia Federal Reserve's regional manufacturing surveys for September and the Labor Department's consumer price inflation report for August.

The weekly jobless claims report, the National Association of Home Builders' housing market index for September and the Commerce Department's housing starts report for August are also among the first-tier data releases of the week.

The Commerce Department's business inventories data for July, the Conference Board's leading economic indicators index for August and announcements concerning next week's Treasury auctions of 2-year, 5-year and 7-year notes round up the economic events of the week.

Stocks in Focus

JetBlue (JBLU) reported that traffic rose 6.7 percent year-over-year in August and capacity climbed 8.3 percent. The load factor fell 1.3 percentage points to 87 percent.