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Pre-Market Primer: Markets Rise Before Fed Announcement

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The Federal Reserve is expected to start a new round of asset purchases.

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MINYANVILLE ORIGINAL Expectations that the Federal Reserve will expand asset purchases and factions in Washington will agree to a budget compromise drove stock index futures higher this morning.

Dow (INDEXDJX:.DJI) futures climbed 0.16% to 13,229 before the opening bell. Futures contracts on the S&P 500 (INDEXSP:.INX) rose 0.21% to 1,434.50 and Nasdaq (INDEXNASDAQ:.IXIC) futures gained 0.28% to 2,693.25.

President Barack Obama is offering Republicans an overhaul of the corporate tax code as part of the deal for a budget that could avert the automatic spending cuts and tax increases known as the fiscal cliff. This could make big businesses and the Republican base more amenable to working with the White House as the deadline for a deal nears. The Democrats offered to lower the top corporate tax rate to 28% from 35%, but make the tax rate even lower for manufacturing companies. The president also eased his demands for tax revenue increases to $1.4 trillion from $1.6 trillion. According to a report today, import and export prices declined last month. Imports to the US became 0.9% less expensive in November, while export prices fell 0.7%.

The big news today will likely come from the Federal Reserve. The minutes of the latest FOMC meeting will be released at 12:30 p.m. and Chairman Ben Bernanke will give a press conference at 2:15 p.m. Analysts expect the Fed to replace the soon-to-expire Operation Twist with another asset-purchasing program that could mean an open-ended commitment to purchase Treasuries.

The Fed is also advising large banks to refrain from making major acquisitions for the time being as part of the debate about the risk that 'too big to fail' financial institutions pose to the economy. According to the Wall Street Journal, the Fed has informally told Capital One Financial (NYSE:COF) to lay off new deals after it purchased ING Groep's (NYSE:ING) US online banking business for $9 billion in 2011.

E I Du Pont de Nemours (NYSE:DD) shares rose 2.55% in the pre-market after the company announced that 2012 earnings will exceed forecasts and the company will buy back $1 billion of its own shares.

Costco (NASDAQ:COST) had a small pre-market rally after the company announced that its fiscal first quarter was better than expected. Net income rose 30% to $4.16 million, or $0.95 per share.

Industrial production in the eurozone fell 1.4% in October, a year-over-year drop of 3.6% from October 2011. This is the weakest level for industrial output in the region since April 2010. The monthly drop was far steeper than economists expected. Much of the decline came from Germany, where output slumped by 2.4%. Portugal showed strong gains of 4.8%.

Machinery orders in Japan rose 2.6% in October, the first monthly gain in three months.

Twitter: @vincent_trivett
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
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