A late slide for stocks Tuesday unraveled a midday surge. Traders joked throughout the day: In a wrong position? Just give it a few minutes. In the end, it was the third straight losing session for the S&P 500 (SPX) and the Dow Jones Industrial Average (DJIA). Oil traders came up for air Tuesday but the downside bias persists as U.S.-priced crude futures hold under $55 a barrel and Europe-priced Brent is under $60 with supply data looming. The CBOE Volatility Index (VIX) jumped another 15% to push above 23 for only the third time this year on Tuesday (see chart below). As for SPX, with the broad index now through 1972, support doesn’t factor in until 1954. That means there’s some downside room here. As for the upside, bulls likely want to see a fight back to close above 2000 for a chance at a fresh move higher.
Fed Unwrapped. Markets will hang on every word as the Federal Reserve issues a statement at 2 p.m. Eastern. Street economists are watching closely for a potential change to the Fed pledge to hold low interest rates steady for a “considerable time.” Most believe that dropping this phrase could be a key next step to an eventual interest-rate rise in 2015. Yet keeping those few powerful words in place could reflect a Fed that wants to buy a little more time before committing to policy change. As a sidebar, keeping the phrase that nearlyeveryone expects to go bye-bye could mean we’re dealing with a Fed that has little choice but to keep the market guessing as its own planned policy course may have a few wrinkles.
U.S.’s Solo Flight? Fed Chair Janet Yellen grabs the mike after the statement release. Will she (or the statement for that matter) address global economic and interest rate inconsistencies or will she convince Wall Street that the U.S. is just fine on its own path? She’ll also likely tackle low-running inflation. Is there such a thing as too low inflation? You bet. Just ask Europe. Some industry economists say they expect the Fed to acknowledge that low inflation is now more of a risk, meaning little traction for businesses to raise prices. Consumer price data out early Wednesday showed a 0.3% drop in November, the biggest monthly retraction in six years, tugged down by oil. You guessed it, add oil to the list of tricky Fed topics. Central bank speeches have highlighted the consumer-spending benefits of cheaper gasoline. Will the Fed now have to acknowledge the negative—the global economic imbalance from the sharp drop in crude prices?
FedEx Did Not Deliver. FedEx (FDX) reported a gain in profit and sales in its latest reporting quarter, just not strong enough to meet or beat Street estimates. Management said lower fuel costs did help results but maintenance charges for its fleet still added up. The good news for bulls: the package delivery firm is sticking to its full-year forecast.