Futures point to flat open Wednesday ahead of Fed statement. Stocks have seen solid gains the past two sessions with traders anticipating some dovish talk on interest rates from the Fed. Tech stocks could get off to a good start this morning after strong earnings reports from Oracle (ORCL) and Adobe (ADBE). Morgan Stanley (MS) also provided a strong report, leading to gains in pre-market trading.
Morgan Stanley announced that its fiscal first-quarter earnings rose 70 percent on a 29 percent rise in revenues. Earnings per share came in at $2.51, easily surpassing estimates for earnings of $1.88 a share. Ahead of the opening bell, MS shares are up more than three percent.
Shares of ORCL are higher by about four percent this morning after the software maker announced that profits rose by 35 percent. Analysts were pleased to see Oracle rebound after a disappointing second quarter.
ADBE shares are also higher in the pre-market, rising nearly four percent as well. ADBE saw a 37 percent jump in profits in its fiscal first quarter ahead of the company's major product launch of the Creative Suite software bundle. The company confirmed guidance going forward leaving traders in the buying mood.
There won't be much economic data ahead of the Fed statement this afternoon, with only weekly mortgage applications and crude inventory data on tap. Mortgage applications for the week ending March 16 fell slightly to 410.6, which puts the index just above the four-week moving average. Low interest rates continue to be a positive for mortgages, but the subprime problems continue to create concern going forward.
Speaking of the subprime sector, shares of Accredited Home Lenders (LEND) and Novastar Financial (NFI) are continuing to rise this morning following strong gains on Tuesday. LEND shares tacked on 20 percent yesterday after receiving a $200 million loan from a hedge fund. However, LEND is paying 13 percent for the loan, which means the rate charged to the consumer will also be extremely high.
The past two sessions have seen gains with traders possibly expecting the Fed to ease its stance rate cuts. Though Fed leaders have acknowledged that the economy is slowing, they have remained more focused on pricing pressures. However, in the past month, economic news has worsened, creating some hope that the Fed will at least take a neutral stance dealing with economic growth and inflation. If the FOMC does not open the door for rate cuts down the road in their statement this afternoon, stocks could be in for some difficulties.
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site