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Fed weighs on Wall St.
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November 16, 1999: 6:49 a.m. ET
Investors' eyes on Washington ahead of policy arm's decision on interest rates
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NEW YORK (CNNfn) - Wall Street, and the rest of the American financial community, will finally find out Tuesday whether Federal Reserve policy makers will raise interest rates -- an outcome that experts find difficult to predict.
"The Fed has a tough job on its hands," said Adam Blankman, an analyst with Standard & Poor's market research arm, MMS. The economy remains strong and labor markets remain tight, yet there's still little evidence of inflation, he said.
Early indication suggest U.S. stocks will open slightly higher.
S&P futures on the Globex trading system were down 0.10 point at 1402. That's 1.59 points above fair value for the futures -- a formula taking into account interest and dividend effects -- which was estimated by London traders at 1400.41. Typically, one point of difference between the futures index and fair value equals about eight points on the Dow Jones industrial average as trading opens.
On Monday, the Dow industrials ended almost unchanged as investors kept to the sidelines ahead of the Fed's monetary policy meeting in Washington. The Dow Jones industrial average fell 8.57 points to 10,760.75. The Nasdaq composite slipped 1.61 points to 3,219.54, and the S&P 500 index dipped 1.65 points to 1,394.39.
In Asia Tuesday, most markets were mixed as Japan's blue chips closed slightly lower while Hong Kong continued to benefit from the breakthrough in China-U.S. trade talks. The Nikkei 225 slipped 43 points, or 0.2 percent, to close at 18,155.14,
In Europe, most major markets were lower with the exception of London's FTSE 100 index, which got a boost from telecom stocks on word that VodaPhone Airtouch is still considering launching the world's largest hostile bid in history for Germany's Mannesmann.
Overnight in the Treasury market, the benchmark 30-year bond was unchanged with a yield of 6.02 percent. In the currency markets overnight, the dollar gained against the yen, rising to 105.44 yen from 104.89 yen late Monday. Against the euro, the dollar was little changed at $1.0341 compared to $1.0315 Monday.
Dominating Wall Street's focus will be the Federal Open Market Committee's decision on short-term interest rates, expected in mid-afternoon Tuesday.
The Fed left rates unchanged at its Oct. 5 meeting, but committee members warned they were considering lifting the benchmark rate again in the near future if inflation appeared to be threatening economic expansion.
Mixed signals concerning the progress of the economy and whether inflation will accelerate has made judging the outcome of this particular meeting more difficult for analysts and economists than in the past, focusing even more attention than normal on the committee's meeting.
The Federal Reserve is also due to report industrial production and capacity utilization figures for October. Economists polled by Reuters are expecting October's figures to climb by 0.3 percent, the same pace as in September. Capacity utilization is expected to hold steady at 80.3 percent.
In corporate news, Internet portal Lycos Inc. could garner some attention Tuesday after reporting earnings after the bell Monday in line with analysts' expectations. Lycos' stock surged in after-hours trading following the earnings announcement, rising 3-1/8 to 63.
Skin care and fragrance company Revlon Inc. could also attract some attention after it reported earnings lower than analysts' forecasts, even after those forecasts were revised downward. Revlon officials also said Monday the company now expects its year-end operating loss to be worse than the $70 million to $80 million it originally projected.
AMR Corp. (AMR) subsidiary American Airlines and British Airways could also grab some of the investing spotlight Tuesday after the two airlines said they were renewing their efforts to develop a global marketing alliance.
A slew of retailers are slated to report earnings Tuesday, including Home Depot Inc. (HD), Dayton Hudson (DH), J.C. Penney Co. (JCP), Saks Inc. (SKS), The Limited (LTD) and Anne Taylor Stores Inc. (ANN).
Staples Inc. (SPLS) beat the others to it early Tuesday, announcing earnings per share of 20 cents in its third quarter, a penny above the 19 cents expected by analysts and above the 15 cent-a-share profit it posted a year earlier.
Campbell's Soup Co. (CPB) is also expected to report earnings Tuesday after posting disappointing results in its fiscal fourth quarter. The food company is expected to have earned 49 cents a share in its fiscal first quarter, down from the 58 cents per share it earned a year earlier.
Among the new issues expected to start trading Tuesday will be communications software developer Quintus, which priced 4.5 million shares at $18 per share, well above its expected range of $12 to $14 per share. Quintus will trade under the symbol "QNTS."
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