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Wall Street's Stimulus Hopes Waver


Sentiment on Wall Street has become shaky on Thursday, as the FOMC decision looms. The markets have traded up in anticipation of stimulus, with the major averages currently at fresh multi-year highs. Ever since the FOMC minutes threw open the possibility of further easing in August, the S&P 500 Index is up 1.66 percent, while the broader average has gained over 2.60 percent since Federal Reserve Chairman Ben Bernanke's Jackson Hole address on August 31st.

Most economists rule out an outright QE announcement, arguing that the Operation Twist is yet to run its course. Additionally, it is firmly believed that the Fed may not use its politically controversial policy tool when the presidential election is round the corner. Jobless claims data due for release ahead of the markets open may also influence trading.

As of 6:30 am ET, the Dow futures are slipping 22 points, the S&P 500 futures are moving down 2.70points and the Nasdaq 100 futures are receding 9.75 points.

U.S. stocks managed to end Wednesday's session higher amid optimism concerning the resolution of the eurozone debt crisis and doubts concerning a Fed stimulus.

On the economic front, the Labor Department is due to release its customary jobless claims report for the week ended September 8th at 8:30 AM ET. Economists expect claims to increase to 370,000 from 365,000 in the previous week.

The U.S. Labor Department is also scheduled to release its report on the producer price index for August at 8:30 am ET. Economists expect the headline index for August to have risen by 1.4 percent, while core consumer prices may have risen by a more modest 0.2 percent. In July, producer prices and core producer prices climbed by 0.3 percent and 0.4 percent, respectively.

The Federal Open Market Committee, the monetary policy-setting arm of the Federal Reserve, is due to release the post-meeting policy statement at 12:30 am ET, followed by the release of the FOMC forecasts at 2 pm ET Bernanke will hold a press briefing at 2:15 pm ET.

Federal Reserve Governor Sara Bloom Raskin is due to speak at the 67th Annual National Conference on Citizenship, on "Exploring the Link Between Civic Engagement and Employment" in Philadelphia at 1:45 pm ET.

The Treasury Budget, a monthly account of the surplus or deficit of the federal government, is due to be released at 2 PM ET. Economists expect a deficit of $160 billion for August compared to a deficit of $69.6 billion for July.

In corporate news, Pall Corp.'s (PLL) fourth quarter results exceeded estimates. While cautioning of challenged in its European industrial markets, moderating growth in some emerging markets and softness in its semiconductor end markets, the company said it expects earnings of $3.05-$3.25 per share for 2013 on low to mid-single digit local currency sales growth. The earnings guidance surrounded the consensus estimate.

Verizon (VZ) and AT&T (T) separately announced that both companies would offer iPhone 5 on their networks, beginning September 21st. The companies said that customers can pre-order the gadget online beginning September 14th.

CSC (CSC) said the U.S. Army Communications-Electronics Command has awarded the company a task order to provide worldwide logistics support, with the order estimated to have a 2-year value of $220 million. Pfizer (PFE) forged an alliance with China's Zhejiang Hisun Pharma for manufacturing and commercializing off-patent pharma products in China and global markets.

Asian markets traded in a lackluster manner amid trepidation about the Fed decision, which is due later in the global trading day. The Australian, Chinese, Hong Kong, New Zealand, Indonesian and Singaporean markets closed lower, while the Japanese, Taiwanese, South Korean, Indian and Malaysian markets ended in positive territory.

Japan's Nikkei 225 average closed up 35.19 points or 0.39 percent at 8,995. Electric utilities advanced strongly, with Kansai Electric Power and Chubu Electric Power rising 9.26 percent and 5.47 percent, respectively.

Australia's All Ordinaries closed down 23.30 points or 0.53 percent at 4,360. The majority of stocks declined, with healthcare stocks coming under strong selling pressure. Hong Kong's Hang Seng Index closed at 20,048, down 27.76 points or 0.14 percent.

On the economic front, the Reserve Bank of New Zealand opted to hold its official cash rate unchanged at 2.50 percent at its September meeting.

European stocks are seeing weakness after ending on a mixed note on Wednesday. The apprehensive mood reflected nervousness of traders over whether the central bank-led by Bernanke will deliver in line with expectations.

In corporate news, BAE Systems confirmed that it is in talks to merge with EADS. ASML Holdings (ASML) said it has issued shares for two of the three participating customers in its customer co-investment program, issuing a total of 75.57 million shares. U.K. clothing retailer Next conceded that sales slowed in August and September after it reported 10 percent growth in first-half profits and 4.8 percent revenue growth.

Meanwhile, the Swiss National Bank decided to leave the cap on the franc exchange rate intact at 1.20 francs per euro and the key interest rate at 0%-0.25%, as widely expected. According to SNB, the Swiss franc is still overvalued and is weighing on economic activity.

by RTTNews Staff Writer

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