Fed red for stocks?

[notiCIas]

Fed red for stocks?

Futures point to lower stocks open ahead of anticipated Fed rate hike, statement.

May 3, 2005: 7:16 AM EDT

NEW YORK (CNN/Money) - Stocks were set to open lower Tuesday as investors await word from the Federal Reserve Tuesday about whether the central bank's policymakers are more concerned with rising prices or a slowing economy.

U.S. stock futures were down in early trading, indicating a lower opening for stocks ahead of the 2:15 p.m. statement from the Fed.

While the Fed is seen as virtually certain to raise interest rates by a quarter percentage point for the eighth straight meeting over the last year, the attention will be on the statement that accompanies that rate hike. Dual concerns about inflation and slower economic growth have dogged markets in recent weeks.

John Silvia, chief economist for Wachovia Securities, said traders are more uncertain than normal about the future direction of the Fed, and will be looking closely for signals whether the Fed is more concerned with the risk of inflation or the threat of slowing growth.

He said if the Fed removes previous language from the statement that speaks of a "measured" pace of rate hikes and talks about prices, it would hurt stocks due to worries that the Fed will start getting more aggressive on rate hikes at its June 29-30 meeting.

Silvia said if the Fed drops discussion of rising inflationary pressures and focuses more of the statement about the slowing economic growth, it'll be seen as a sign that it may keep rates unchanged in June. He said that would lift stocks even though it would signal weaker growth.

"I think the market may sell off if there's no change in statement," Silvia said. "It'll still be in the same difficult position, and it'll be disappointed that at this point the Fed is still pursuing goal of raising rates."

Oil prices remained above the $50 a barrel level reached in trading Monday. The June light crude contract lost 67 cents to $50.25 a barrel in electronic trading, while the June contract for Brent crude, which did not trade Monday due to a holiday in London, rose 10 cents to $51.19.

Major markets in Asia closed mixed Tuesday, although markets in Japan were closed for a holiday. Major European markets were slightly higher ahead of the Fed meeting.

Treasury prices were little changed, with the yield on the 10-year note at 4.19 percent. The dollar gained ground on the yen but lost ground on the euro.

In economic news, a report on March factory orders is forecast to show a 1.2 percent decline, according to economists surveyed by Briefing.com. That follows a 0.2 percent gain in February.

A report on April layoffs is also due from executive search firm Challenger. That report comes ahead of Friday's Labor Department report on April employment levels.

U.S. automakers are due to report their April sales throughout the day Tuesday. General Motors (Research) and Ford Motor (Research) are expected to show further market share declines to DaimlerChrysler (Research) and Asian automakers such as Toyota (Research).