Morning Report: Fed Starts Its Engines

(Stocks in this article: NYSE: PG, NYSE: CL, NYSE: PTR, NYSE: ABX, NYSE: UBS, NYSE: CFC, NYSE: KMB, NYSE: CAT, Nasdaq: SIRI, NYSE: PMI, NYSE: F, NYSE: Q)

Futures indicate a lower open for stocks as the anxiety intensifies on Wall Street regarding the pending Fed decision. The FOMC begins its two-day meeting today that will culminate in its decision and policy statement tomorrow afternoon. Yesterday we outlined our expectations and continue to recommend the shorting or exit from gold and big oil shares, including names like Barrick Gold (NYSE: ABX) and PetroChina (NYSE: PTR), which have banked big appreciation over the period since the mid-August emergency move from the Fed. I continue to feel strongly about this action, and today offers investors even better exit points or short points to take action from.

Consumer staple providers Procter & Gamble (NYSE: PG) and Colgate-Palmolive (NYSE: CL) reported quarterly results today. These companies are benefiting from global growth on a softer dollar, while offering stability of sales and ability to traverse economic troughs. However, PG is down 2% in the pre-market, as despite beating estimates by a penny and raising its forecast to a level only meeting analysts consensus, the company pointed to margin pressure from higher commodity and energy prices. This is the theme driving these shares now.

However, I see pricing strength in providers of premium brand consumer staples (unless things get really bad), and I would expect PG and others to follow the lead of Kimberly-Clark (NYSE: KMB), and raise prices. PG is up this year, especially since September, and so I would give its shares some time to settle over the near-term, and depending on Fed catalyst, look to buy on weakness later. Remember, bad news for most stocks is usually a capital driver into consumer staple shares.

CL also beat estimates by a penny today, but also offers a stock that has run up since September and a valuation that looks pricey to me. Its shares are down in the pre-market, and my feeling is that the day and near-term might offer better opportunity to enter multinational stocks in the consumer staples sector. Despite my concerns for the likes of Caterpillar (NYSE: CAT), I think within the bathwater that could be thrown out on the dollar finally finding footing, investors could find new opportunty to enter global consumer staples shares later and maybe as soon as this afternoon.

Later this morning, The Conference Board will report its Confidence Index, and Bloomberg's consensus of economists is looking for an October measure of 99.0, compared to September's reading of 99.8. I would not be surprised to see the measure come in lower, as the University of Michigan metric of consumer sentiment surprised on the down side last week. This would offer more bad news for the fringe retailers in what I view as a saturated retail environment. I'll take a closer look at which players might meet their maker in a future article.

Oil prices have come off yesterday's highs, as comments from Qatar's OPEC minister have helped raise confidence that the group is attentive. Mr. Attiyah commented that OPEC would boost production if it saw a physical need for it. We may have gotten a look into OPEC's collective mind, as Attiyah likely offered a hint of things to come should war break out involving Iran. Still, this is another reason to short big oil and PTR especially over the near-term. I continue to expect the dollar to find footing post the Fed meeting, as the FOMC could discuss dollar concerns and a forward neutral bias. This would likely help the dollar and hurt oil and gold prices.

Market-Moving News

• CNN Money: Asian Stocks Mostly Lower


• Financial Times: FTSE Rally Fades


• ICSC - UBS: Weekly Same-Store Sales Report


• ECONOMIC REPORT: The Conference Board's Consumer Confidence Index October 10:00 AM - Consensus 99.0


• Bloomberg: Paulson Says U.S. Economy Not Bottomed


• AP/Yahoo!: Fed Meeting Begins Today


• DailyFX: Fed Trick or Treat?


• Platts: Qatar's Attiyah Says OPEC Will Act On Physical Supply Need


• AP/Yahoo!: P&G (NYSE: PG) Bests Forecasts


• AP/Yahoo!: Colgate-Palmolive (NYSE: CL) Profit Up 22%


• Financial Times: CountryWide's (NYSE: CFC) Mozilo Strikes Back at Gov't


• Bloomberg: European Retail Sales Fall in October


• CNBC: German Unemployment Drops


• ICSC - Holiday Sales Forecast


• TheStreet.com Earnings Calendar


• AP/Yahoo!: Sirius (Nasdaq: SIRI) Narrows Q3 Loss


• AP/Yahoo!: PMI Group (NYSE: PMI) Swings to Loss


• AP/Yahoo!: Ford's (NYSE: F) Carrot


• AP/Yahoo!: Qwest (NYSE: Q) Finds Tax Benefit


• Financial Times: UBS (NYSE: UBS) Forecasts Return to Profitability


• BBC: Blowing Up Musharraf


• Economist: Geopolitical Week Ahead


• Iran Daily: Tales from the Dark Side

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