US futures head higher as Fed meets

Associated Press
FILE - In a Jan. 30, 2009 file photo traders work on the floor of the New York Stock Exchange.  A two-day rally that sent stocks soaring last week fizzled out Monday July 30, 2012.  (AP Photo/Richard Drew, file)
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FILE - In a Jan. 30, 2009 file photo traders work on the floor of the New York Stock Exchange. A two-day rally that sent stocks soaring last week fizzled out Monday July 30, 2012. (AP Photo/Richard Drew, file)

NEW YORK (AP) — U.S. stock futures moved higher Tuesday ahead of a two-day policy meeting at the Federal Reserve.

Markets have grown increasingly confident that the Fed will act again to kick-start the economy, but when it will do so is the topic of debate on Wall Street.

Dow Jones industrial futures rose 24 points to 13,025 and the broader S&P futures added 2.8 points at 1,383.30. Nasdaq futures gained 10.25 points at 2,646.

Corporate earnings over the past two weeks show clearly the headwinds that have created an anemic picture for the job market.

Aetna on Tuesday said its second-quarter net income tumbled almost 15 percent, as rising medical costs countered revenue gains. Archer Daniels Midland, hammered by record corn prices, saw its net income for the fourth quarter tumble 25 percent.

U.S. Steel says its second-quarter net income fell by more than half as slowing global economic growth slashed demand in a number of its core markets.

The Commerce Department reported Tuesday that spending by the U.S. consumer was unchanged in June, though personal income edged up 0.5 percent.

That would suggest there will be more pressure on the Fed to act because it appears that Americans are putting their paychecks in their pockets, rather than spending it.

In a consumer economy like the U.S., it is unlikely that a recovery will gain full steam without the consumer playing a role. Consumer spending drives 70 percent of all economic activity.

A better picture of that landscape may emerge at 10 a.m. Eastern when the private research group The Conference Board releases its monthly report on consumer confidence.

After four straight months of declines, economists expect the monthly index to flatten out at 62 for July. The pause in the downward trajectory would be welcome, but it would remain well below the level of 90 that indicates a healthy economy. That hasn't been seen since December 2007, which marked the beginning of the recession.

That is why the question of if or when the Fed will act will remain at the forefront.

The economy grew at an annual rate of only 1.5 percent from April through June, worse than the 2 percent gained during the first three months of the year.

It's an ugly trend, but some economists do not believe it's bad enough for the Fed to initiate another round of Treasury bond buying.

The Fed has tried that twice, in addition to acquiring mortgage-backed securities, to keep long-term interest rates low.

It hoped to spark more borrowing and spending, but after two rounds, that has failed to gain traction.

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