U.S. Stocks May Move To The Upside As Fed Announcement Looms

Following the mixed performance seen in the previous session, stocks are likely to move mostly higher in early trading on Tuesday. The major index futures are pointing to initial strength on Wall Street, with the S&P 500 futures up by 0.4 percent.

Stocks are likely to benefit from optimism about the outlook for interest rates ahead of the Federal Reserve’s monetary policy announcement on Wednesday.

While the Fed is widely expected to lower interest rates, there remains some debate about the size of the rate cut.

CME Group’s FedWatch Tool is currently indicating a 67.0 percent chance of a half point rate cut and a 33.0 percent chance of a quarter point rate cut.

Whether the Fed decides to cut rates by 25 or 50 basis points, the central bank is still expected to continue lowering rates over the remainder of the year.

The futures remained positive following the release of a Commerce Department report unexpectedly showing a modest increase by U.S. retail sales in the month of August.

The Commerce Department said retail sales inched up by 0.1 percent in August after surging by an upwardly revised 1.1 percent in July.

The uptick surprised economists, who had expected retail sales to dip by 0.2 percent compared to the 1.0 percent jump originally reported for the previous month.

Excluding a slight pullback by sales by motor vehicle and parts dealers, retail sales still crept up by 0.1 percent in August after climbing by 0.4 percent in July. Ex-auto sales were expected to rise by 0.2 percent.

Shortly before the start of trading, the Federal Reserve is scheduled to release its report on industrial production in the month of August. Industrial production is expected to rise by 0.2 percent in August after falling by 0.6 percent in July.

The National Association of Home Builders is also due to release its report on homebuilder confidence in the month of September not long after the open. The housing market index is expected to inch up to 40 in September after dipping to 39 in August.

Additionally, Commerce Department is scheduled to release its report on business inventories in the month of July. Business inventories are expected to climb by 0.3 percent in July, matching the increase seen in June.

U.S. stocks ended on a mixed note on Monday as investors looked ahead to the Federal Reserve’s monetary policy announcement later this week and stayed largely cautious and selective with regard to their moves.

Among the major averages, the Dow hit a new record high and ended up 228.30 points or 0.6 percent at 41,622.08 and the S&P 500 settled at 5,633.09 with a small gain of 7.07 points or 0.1 percent, while the Nasdaq closed lower by 91.85 points or 0.5 percent at 17,592.13.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan’s Nikkei 225 Index slumped by 1.0 percent, while Hong Kong’s Hang Seng Index surged by 1.4 percent.

Meanwhile, the major European markets have all moved to the upside on the day. The U.K.’s FTSE 100 Index, the German Index and the French CAC 40 Index have all climbed by 0.7 percent.

In commodities trading, crude oil futures are inching up $0.05 to $70.14 a barrel after jumping $1.44 to $70.09 a barrel on Monday. Meanwhile, after edging down $1.80 to $2,608.90 an ounce in the previous session, gold futures are falling $12.30 to $2,596.60 an ounce.

On the currency front, the U.S. dollar is trading at 140.90 yen compared to the 140.62 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1120 compared to yesterday’s $1.1133.