MarketWatch.com - Pre-Market Indications

Wednesday, November 3, 2010

Indications: U.S. futures steady after election; Fed in focus

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By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) â€" U.S. stock futures pointed to a flat open for Wall Street Wednesday after the Republican Party won control of the House of Representatives and as investors awaited the outcome of the Federal Reserve meeting.

Futures for the Dow Jones Industrial Average /quotes/comstock/21b!f:dj\z10 (DJZ10 11,167, +15.00, +0.13%)  gained 9 points to 11,152, and those for the S&P 500 index /quotes/comstock/21m!f:sp\z10 (SPZ10 1,195, +1.90, +0.16%)  added 0.9 point to 1,193.6.

Futures for the Nasdaq 100 index /quotes/comstock/21m!f:nd\z10 (NDZ10 2,153, +2.25, +0.10%)  edged up 0.75 point to 2,151.

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The picture emerging from the U.S. midterm elections was that voters opted for change, but not in a dramatic fashion. Republicans took control of the House of Representatives, but Democrats managed to maintain a majority in the Senate. Read more about the U.S. election results.

Strategists at FxPro said the election played out largely as expected.

“The market reaction has been pretty muted, in part because it was very much anticipated and naturally because the Fed result is the greater near-term risk factor,” they said in a note.

“On the bigger picture, the question is the extent to which this leads to policy paralysis or the president working with Republicans to reduce the deficit. Both Reagan and Clinton successfully came back from midterm defeats, so politically there’s still everything to play for,” the analysts added.

The market remains focused on the Fed, whose policy announcement is due at 2:15 p.m. Eastern time. Observers largely expect some form of quantitative easing as the central bank seeks to boost the U.S. economy.

“Overall, given the disparate voices within the Fed, we think the approach will be a balance between promising the potential for big action, but committing less up front and giving themselves lots of wiggle room to adapt to changing circumstances,” wrote Jim Reid, strategist at Deutsche Bank, in a note.

The data calendar is also full, with ADP employment for October due at 8:15 a.m. and ISM services for October and factory orders for September due at 10 a.m. All times are Eastern.

U.S. auto stocks are likely to be in focus, with October car sales also expected Wednesday.

QE dominates, but elections matter

Financial markets may be more focused on monetary policy than midterm elections.

Among companies reporting before the bell, Time Warner Inc. /quotes/comstock/13*!twx/quotes/nls/twx (TWX 32.41, +0.08, +0.25%)  said third-quarter net income fell 21% on 1.8% higher revenue, but lifted its adjusted profit forecast for 2010.

AOL Inc. /quotes/comstock/13*!aol/quotes/nls/aol (AOL 25.29, -0.23, -0.90%) said third-quarter profit more than doubled from the year-ago period on lower costs, even as advertising and subscription revenues fell.

Meanwhile, BlackRock Inc. /quotes/comstock/13*!blk/quotes/nls/blk (BLK 173.04, +1.19, +0.69%)  said Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 11.40, -0.10, -0.87%)  and PNC Financial Services Group Inc. /quotes/comstock/13*!pnc/quotes/nls/pnc (PNC 52.90, -0.27, -0.51%)  will sell a combined 42 million of its common shares in a secondary offering.

Shares of Electronic Arts Inc. /quotes/comstock/15*!erts/quotes/nls/erts (ERTS 16.20, +0.40, +2.53%)  could be in play after the company reported a surprise adjusted profit for its fiscal second quarter late Tuesday, despite a drop in sales owing to tough comparisons.

Shares of Anheuser-Busch InBev /quotes/comstock/13*!bud/quotes/nls/bud (BUD 63.51, +0.65, +1.03%)   /quotes/comstock/24s!e:abi (BE:ABI 44.07, -0.84, -1.86%)  fell 1.7% in Brussels after the company reported a decline in net profit on tough beer sales in the U.S. and Europe.

Stocks in Europe moved higher ahead of the Fed decision, with shares of Societe Generale SA /quotes/comstock/24s!e:gle (FR:GLE 44.03, +1.93, +4.57%)  gaining after results.

Iceland’s central bank cut key interest rates by 0.75 percentage point.

In Asia, Hong Kong’s Hang Seng index broke the 24,000 mark to trade at its highest level since mid-2008, led by banks.

The dollar traded mostly lower against other major currencies, with the dollar index /quotes/comstock/11j!i:dxy0 (DXY 76.71, -0.02, -0.02%)  down 0.2% to 76.574.

Barbara Kollmeyer is an editor for MarketWatch in Madrid.

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