Today's Key News - All Eyes on Fed

The Dow is lower this morning, impacted by Fedex, while the NASDAQ and S&P 500 are modestly higher. All eyes are on the Fed, as it concludes its two-day meeting this afternoon. There shouldn't be much to report regarding interest rates, but the ailing market wants some soothing medicine from the Fed within its statement. Comments from the regional Fed heads should be closely followed for clues during the remainder of the week. Earnings news is mostly driving the market this morning, and investors are finding some comfort in the reports from Morgan Stanley and Oracle.


Asia:
Hang Seng Index +0.82%; Shanghai/Shenzhen 300 +1.12%; NIKKEI 225 CLOSED; Taiwan TAIEX +0.27%; BSE SENSEX 30 +1.89%; KRX 100 -0.1%; Ho Chi Minh -0.5%


U.K., Europe & Middle East:
DJ STOXX 50 Index +0.36%; FTSE 100 +0.59%; CAC 40 -0.03%; DAX +0.17%; Russian RTS Index +0.82%


Key Headline News:

• *** All eyes are on the Fed today, as it will report its decision on interest rates at 2:15 p.m. EDT. Last time around the Fed announced its expectations for economic growth later this year. In light of the rising concerns about the subprime space, consumer spending and potentially employment, we speculate the Fed may temper its enthusiasm this time around. We do not expect the Fed to make a move today. More efficient financial markets have already tempered the impact of failing subprime lenders, adding liquidity support. Credit concerns may not require the Fed as much as in the past, giving it some leeway perhaps to stay firm against inflation. However, that kind of news is not calming to markets, but we expect Bernanke could reaffirm the Greenspan insurance plan, a sort of unwritten guarantee that the Fed would add liquidity if necessary.
• *** Despite relatively low rates, weekly mortgage applications fell in the week ended March 16th. Rates on 30-year fixed mortgages were slightly higher from the prior week by 0.03 of a percentage point. Still, tighter lending standards and a perhaps flooding home inventory market, with foreclosures portending to add some saturation, could lead prices lower. This threat, as much as anything, should limit the housing sector this year, in our view.
• *** A Merrill Lynch poll of portfolio managers showed a drop in confidence in U.S. assets. The poll was conducted in early March, and equities have risen some since. It's about time investors back up and take a second look at the economic situation and valuation. We expect this jolt of risk to not fade so quickly, and everything going forward depends on economic data and the true direction and health of the economy. Leading economic indicators are on the way tomorrow, and they are not expected to forecast a positive outlook.
• *** Morgan Stanley and Oracle reported strong quarterly EPS, while Fedex reported the effects of a slowing economy.

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