WALL STREET OUTLOOK Flat ahead of Fed rate decision UPDATE

WALL STREET OUTLOOK Flat ahead of Fed rate decision UPDATE

	Published : Wed, 21 Mar 2007 14:04 By : Agencies Print this Story

(Adding FedEx results, Alcoa, Alcan downgrades)

NEW YORK (AFX) - US stock futures are pointing to a largely flat open as investors tread cautiously ahead of a Federal Reserve decision on interest rates, but technology stocks could outperform after Oracle and Adobe Systems posted strong quarterly results.

Dow futures were unchanged at 12,385, Nasdaq 100 futures rose 3 points to 1,795.25 and S&P 500 futures dipped 0.20 points to 1,423.20.

'We are looking at a relatively quiet start to trading on Wall Street as dealers await details of the latest FOMC (Federal Open Market Committee) meeting before deciding where to take stocks next,' according to CMC Markets, a web-based institutional trading site.

'Speculation is clearly building that interest rates in the US need to start easing off a little, and any suggestion that we'll see such a move in the not too distant future could result in further flows from cash into equities,' it added.

The Fed has kept rates on hold for five consecutive meetings following two years of gradual rises. Its key Fed Funds rate currently stands at 5.25 pct.

The central bank is widely expected to keep interest rates unchanged, but investors are hoping the statement that accompanies its decision will shed some light on the Fed's thoughts on the crisis in the sub-prime lending market, inflation and the economic outlook.

Yesterday, stocks ended higher for the second day in a row as corporate takeover activity in the US and overseas boosted investor confidence and helped the market weather a mixed report on the nation's housing sector.

Oil prices moved higher in early trading on expectations the latest US supply data will show a fall in gasoline stocks for the latest week.

New York light sweet crude for May delivery was last up 37 cents at 59.62 usd per barrel.

The US dollar traded higher against its major counterparts, as currency traders appeared to bet the Federal Reserve will not signal a rate cut any time soon given current inflationary pressures in the economy.

The euro was last down 0.1 pct at 1.3297 usd. Against the Japanese yen, the dollar added 0.4 pct to trade at 117.77.

Gold futures traded higher for a fourth straight session, helped by the rise in oil that sent inflation-averse investors seeking refuge in the precious metal. Gold is traditionally viewed as a safe haven investment in times of inflation.

The benchmark April contract was last up 3.10 usd at 662.10 usd per ounce.

Treasury prices edged lower as fixed-income traders awaited the Fed's rate decision.

The benchmark ten-year note was last down 2/32 at 100 16/32, with its yield at 4.56 pct.

In company news, shares in Oracle Corp rose 77 cents or 4.4 pct to 18.31 usd in pre-market trading, after the business software maker posted a forecast-beating 35 pct rise in third-quarter profit, buoyed by strong sales growth and a sharp rise in new software licences.

Also in the software space, Adobe Systems gained 1.55 usd or 3.8 pct at 42.30 usd in pre-market dealings, after the company lifted its earnings outlook after a first quarter that exceeded analyst expectations.

Morgan Stanley rallied 2.8 pct to 78.20 usd in pre-market dealings after the investment bank posted first-quarter results that topped Wall Street estimates.

But shares in Fedex Corp dropped 1.3 pct to 110.78 usd after the package delivery group's latest quarterly revenue fell short of analyst expectations as sales at its FedEx Kinko stores slipped.

Boeing Co shares could see gains after Australia's Virgin Blue Holdings Ltd ordered six of its 777-300ER jetliners, with options for six more, a deal worth 1.5 bln usd.

In broker action, shares in Alcoa and Alcan could move lower after Prudential Equity lowered his recommendation on the two companies as part of a broader downgrade of the aluminium industry.

The broker said his lowered rating reflects increased production of aluminium from China, which will only be partially mopped up by increased demand for the metal there in 2007.

The US aluminium industry, meanwhile, is likely to suffer from increased inventory and higher costs this year, the broker said.

Mark.Cotton@thomson.com

mc1/cmr/mc1/ms1

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