U.S. Index Futures Gain on Fed Bets After 3-Day Slump

By Jonathan Morgan

U.S. stock futures advanced, indicating the Standard & Poor’s 500 Index will rebound from a three-day slump, amid speculation the Federal Reserve will remain supportive of the economy even as policy makers gear up for an interest-rate increase.
Bank of America Corp. and Goldman Sachs Group Inc. climbed at least 0.8 percent to lead gains among banks. Apple Inc. increased 0.8 percent. FedEx Corp. slipped 3.4 percent after the company reported fiscal second-quarter earnings that fell short of analyst estimates. United Parcel Service Inc. lost 1.6 percent.
Futures on the S&P 500 expiring in March added 0.5 percent to 1,975.1 at 7:58 a.m. in New York. Dow Jones Industrial Average contracts rose 74 points, or 0.4 percent, to 17,081 today.
“In the U.S. there’s some pivoting over the ‘considerable time’ phrase,” Michael Ingram, a market strategist at BGC Brokers LP in London, said by phone. “It won’t be
replaced with nothing. There’s some feeling that they’ll keep some of that language in there, and the futures are seeing some support from that. It is also a bounce because the U.S. has been down a bit harder in the last couple of days.”
The Fed ends a two-day meeting today, with economists predicting plunging oil prices won’t stop policy makers from dropping a vow to keep interest rates low for a “considerable time.” Officials are gearing up for a 2015 interest rate increase by dropping the language from their statement and replacing it with a different term such as “patient” to describe its approach to policy, according to 68 percent of economists in a Bloomberg News survey.

Fed Statement

The Federal Open Market Committee releases its policy statement along with quarterly economic projections at 2 p.m. today in Washington. Fed Chair Janet Yellen will holds a press conference at 2:30 p.m.
An index of consumer prices to be published at 8:30 a.m. in Washington is expected to fall 0.1 percent in November from being unchanged the previous month.
The S&P 500 has dropped 5 percent from a record on Dec. 5, as a slide in crude prices and signs of a worldwide economic slowdown rippled through financial markets.
Investors have seen the wildest fluctuations in U.S. stocks since October, with the Chicago Board Options Exchange Volatility Index at the highest since Oct. 16. The S&P 500 yesterday fell 0.9 percent as a sell-off in technology shares overshadowed gains in oil producers.

Oil Prices

Crude oil has slumped to a five-year low as the Organization of Petroleum Exporting Countries seeks to defend market share while a U.S. shale oil boom exacerbates a global glut. At the same time, the U.S. Congress is talking about allowing unfettered oil exports for the first time in almost four decades, potentially swelling supplies even more.
FedEx lost 3.4 percent after quarterly profit missed analysts’ estimates as the operator of the world’s largest cargo airline spent more on aircraft maintenance and collected less in fuel surcharges.
Volcano Corp. jumped 55 percent after Royal Philips NV agreed to buy the diagnostic equipment maker for $1 billion. Shareholders of Volcano will receive $18 a share in cash, Philips said in a statement.
Cliffs Natural Resources Inc. retreated 12 percent. The biggest U.S. iron-ore producer will need to be recapitalized within the next two years and near-term earnings aren’t sufficient to support its debt load, Credit Suisse Group AG analysts said. The broker cut its share-price target to $1 from $10.