Futures are going nowhere ahead of the Fed

The day is finally here, and ahead of the Federal Reserve’s policy announcement Thursday afternoon, stocks are going nowhere.

Near 6:40 a.m. ET, Dow futures were down 20 points, S&P 500 futures were down 3 points, and Nasdaq futures were down 4 points.

It’s a busy day for the US economy. Economic data on housing starts, building permits, and initial jobless claims are due.

But the main event starts at 2:00 p.m. ET, when we get the Fed’s decision on whether it’s raising its benchmark rate for the first time in a decade. This will be followed about half an hour later by a press conference with Fed chair Janet Yellen. You can read our full preview of the events here.

It’s not just the stock futures market that is quiet ahead of the open. The dollar index was unchanged and gold was down about $US2 an ounce.

“Positive moves yesterday have been tempered by traditional hold-off-and-see stance by market participants ahead of a Fed announcement,” noted Accendo Markets’ Mike van Dulken in a client brief.

There are any number of guesses for what the Fed would do today. This morning, fed fund futures were reflecting a 30% probability that the Fed would raise rates, similar to what they have shown over the past several days.

The most important thing is that markets are not surprised by the Fed decision, and in fact, the FOMC itself would want to avoid this.

In a note to clients, Dario Perkins at LombardStreet Research wrote, “Given how jittery markets have been in 2015, there is clearly a strong case for avoiding nasty surprises. A rise of 25bps isn’t a big deal, but it depends how investors interpret it. In principle, a carefully worded FOMC statement should be able to limit the damage.”

For now, based on the quietness in markets and relatively low volumes on the New York Stock Exchange all week, it seems investors are doing that damage control on their own before we hear from the Fed.

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