Wall Street Greek: Market Report: Fed Announcement Due

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Wednesday's Market Report brings the close of the two-day Federal Open Market Committee (FOMC) meeting. We also received the latest mortgage activity news and will receive International Trade and Treasury Budget data through the day.

Market Report

Fed Announcement

The Federal Open Market Committee (FOMC) meeting closes today with its Policy Statement release at 2:15 PM. It is widely expected that the Fed will hold rates steady, so the focus of attention will be on the words of the economic leadership. Much attention will be directed toward any discussion of economic improvement and "exit strategy." Market players are interested in knowing if the Fed will cease purchases of Treasuries, as the September $300 billion quota/deadline is reached. The BOJ said earlier this week that it would play it by ear, perhaps seeking leadership from our Fed.

The market puts significant weight in the opinion of the government's economic seers, especially during uncertain times. So, look for market swing based on the economic discussion and forecast of the Fed. According to our resident technical strategist (and others), there's fertile ground for correction should Messenger Bernanke trip over his tongue.

Mortgage Activity

For the week ending on August 7, the MBA's Market Composite Index of mortgage activity showed a 3.5% decline on lower refinance activity that in turn fell on higher rates. The average contracted 30-year fixed rate mortgage saw rate increase to 5.38%, from 5.17% the week earlier. The Refinance Index dipped 7.2% as a result, but purchase activity continued to offer reason for housing enthusiasm. The Purchase Index rose 1.1%, marking the third such rise in four weeks... pleasant news. It should be clear by now that the all-clear has been sounded in housing. Tell Uncle Tom (I have an Uncle named Tom) it's okay to buy now.

International Trade Report

The International Trade Report for June showed the trade deficit expanded to $27 billion, from $26 billion a month before (revised). The trade gap, however, widened less than economists expected ($28.5 billion). Good news too, in that the gap in manufacturing narrowed. Exports moved 2.0% higher, while imports rose 2.3%. Petroleum played a role in exacerbating trade gap widening, so the ex-oil numbers were meaningful and slightly hidden to the layman.

EIA Petroleum Status Report

Oil inventory data is due for release at the usual 10:30 report. Last week's data showed inventory increased by 1.7 million barrels in the period ended July 31. Gasoline stocks fell by 0.2 million barrels. We are in the midst of summer driving season, and fewer folks can afford long vacations involving flights... So, more of you are driving for a day to the beach or mountain or park... simple logic, yet a normal seasonal pattern, possibly exacerbated by economic weakness.

Treasury Budget

July's Treasury deficit is expected to expand sharply by $180 billion, versus the $94.3 billion draw from coffers in June. The nine month total deficit for the fiscal year stands at $1.1 trillion. Recall, government estimates were for a $1.3 trillion deficit this year, if my memory serves me.

Corporate Earnings News

The day's schedule highlights reports from Advance Auto Parts (NYSE: AAP), Aegean Marine Petroleum (NYSE: ANW), BHP Billiton (NYSE: BHP), CACI Int'l (Nasdaq: CACI), China Automotive (Nasdaq: CAAS), Ethan Allen (NYSE: ETH), Hillenbrand (NYSE: HI), JA Solar (Nasdaq: JASO), Kinross Gold (NYSE: KGC), Liz Claiborne (NYSE: LIZ), Macy's (NYSE: M), Sara Lee (NYSE: SLE), Toll Brothers (NYSE: TOL) and several others including many Chinese companies.