Markets are mixed in early trading in subdued volume ahead of today's FOMC announcement and Bernanke press conference. The Fed's "Operation Twist" is set to expire so many expect a new program of bond buying to be announced today. It is debatable if the market has been running more on expectations of more quantitative easing (QE) or hopes of a fiscal cliff agreement.
Folks should be careful about wishing for a hastily reached fiscal cliff agreement. Although the markets might breath an initial sigh of relief, if the terms of the deal aren't favorable for economic growth I think it could make 2013 more problematic for the markets.
In corporate news, Wal-Mart (WMT) made cautious comments about the company's holiday sales. Costco (COST) is higher after reporting solid earnings. And Joy Global (JOY) is also higher after solid results but cautious guidance.
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Asian markets were mostly higher overnight despite N. Korea launching a rocket over the Japanese island of Okinawa. Japan resisted the urge to shoot down the rocket. China was 0.4% higher after Nomura sees GDP growing 8.2% in 2013.
Europe's markets are also mostly higher ahead of our Fed meeting. Greece's debt buyback was a partial success but the country was unable to reduce its debt by the full target amount.
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The dollar index is lower which is helping commodities. Oil prices are up to $86.35 and gold prices are higher near $1712.
The 10-year yield is getting a boost to 1.67%. And the volatility index is currently higher by 2.5% near the 16 level.
Trading comment: The SPX is currently higher for a 6th straight day. Of course, the real action will start after the FOMC announcement. It feels like more QE is already being priced in, and so any announcement of such wouldn't produce much of an upside surprise. I also think the markets are expecting some positive news regarding a fiscal cliff agreement. Since we are getting short-term overbought in the market, a pullback would not be surprising. But the overall price action remains constructive and it is not out of the question that the markets have a shot a making a run at the September highs.