Stocks: Waiting on the Fed

Written By limadu on Rabu, 12 Desember 2012 | 04.32

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NEW YORK (CNNMoney)

Fed officials are "universally expected" to expand the the third round of its bond-buying program, which is known as QE3, adding Treasuries to the current monthly purchase of $40 billion in mortgage-backed securities when Operation Twist concludes Dec. 31, said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.

U.S. stock futures edged higher as investors grew optimistic that the Fed will meet those expectations.

Under Twist, the Fed has been selling short-term Treasuries it already owns in order to buy $45 billion a month in longer-term bonds, with the aim of lowering long-term interest rates without having to increase the dollar amount of the assets on its books.

While some predict that the Fed will now start buying $45 billion a month in Treasuries as a replacement, Sullivan said the new purchase program may be somewhat smaller.

Related: Federal Reserve may buy more bonds

The Fed's policy announcement is due at 12:30 pm ET. The central bank's new economic forecasts are due later in the afternoon, while Fed chairman Ben Bernanke will take questions at a news conference at 2:15 pm.

U.S. stocks finished higher Tuesday on expectations for additional stimulus from the Fed.

Corporate results are due in the morning from discount retailer Costco (COST, Fortune 500). And investors will also be looking for further news out of the fiscal cliff negotiations in Washington.

Fear & Greed Index

European markets were mixed but steady in morning trading, with France's benchmark index in the red. Asian markets continued their winning streak, even as North Korea fired a long-range rocket -- an unnerving event for many countries in the region. To top of page

First Published: December 12, 2012: 3:46 AM ET


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