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Markets To Open In The Green Ahead Of Fed Minutes

Tablet displaying intraday stock performance

Pre-open sentiment indicates a positive open for stocks ahead of the Fed minutes that are expected to offer valuable clues about the central bank's thinking and the lift-off odds at the mid-December FOMC meeting.

We saw two major changes to the Fed statement at the conclusion of the last FOMC meeting. First, they explicitly referred to the December meeting as the time when they will consider raising interest rates. And second, they dropped the reference to global economic developments that had appeared in the prior meeting, which seemed to indicate that the Fed was in agreement with the market's concerns about developments in China and other major developing markets.

Both these combined helped frame the market's Fed expectations, with market participants starting put greater odds of lift-off at the December meeting. The minutes of that meeting coming out this afternoon will offer greater insight into the committee's thinking in making those changes.

The Fed has been consistently saying that they will remain data dependent, with the key remaining data point before the next meeting being the government jobs reading on December 4th. The tone and substance of recent economic data has been mixed at best, though many in the market suspect that the bar for Fed to give up on a December rate hike remains very low.

What that means is that while recent economic readings may not have been very robust - such as this morning's Housing Starts data - they aren't weak enough to stop the Fed from holding back in December. That is perhaps the right way to look at the next jobs report as well. In the absence of a dramatically bad jobs reading on December 4th, the Fed is on track to go for lift-off at its next meeting.

Beyond the Fed, we got positive retail sector earnings reports from Target ( TGT ) and Lowe's ( LOW ) this morning that follow similar favorable reports from Wal-Mart ( WMT ) and Home Depot ( HD ) the day before. The momentum in the home-improvement retailers comes as no surprise, as the housing sector has been among the brighter sports in the economy at present, this morning's soft housing starts numbers notwithstanding.

The Target and Wal-Mart reports should help some of the concerns about the holiday shopping outlook that cropped up following a string of weak reports from major department store operators. It appears that the issue is with the full-priced department store business model, as some of the discounters in that space - like TJX Companies ( TJX ) and Kohl's ( KSS ) - did reasonably well.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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