S&P 500; US Indexes Fundamental Daily Forecast – Hawkish Fed Minutes May Send Bullish Signal to Stock Investors

U.S. stock index futures are indicating a higher opening based on the pre-market trade. The price action suggests investors have already shrugged-off yesterday’s dismal performance and concerns over geopolitical risk with North Korea and fresh political turmoil in Washington.

Traders are also responding to mostly higher markets in Europe and positive closes in Asia.

Shortly before the cash market opening, investors will get the opportunity to react to the latest data on U.S. housing at 1230 GMT. Building permits are expected to show a 1.25 million unit increase. Housing starts are expected to come in at 1.22 million units.

Later in the session at 1800 GMT, the Fed will release its monetary policy meeting minutes. Investors will be poring through the data looking for the central bank’s opinion on the state of the U.S. economy, and where its strategy could be heading.

The recent string of weak U.S. inflation data makes this the number 1 concern for the Fed and investors, and both are hoping the central bank minutes reveal more than just the low inflation is “transitory”.

Traders are also hoping the Fed reveals some of the details of its plan to begin reducing its massive $4.5 trillion debt portfolio. At its last meeting, it said it expected to winding down the portfolio “relatively soon”.

Yesterday, the market’s gains were limited by a weak performance in the retail sector despite a robust U.S. retail sales report. On Tuesday, U.S. retail sales recorded their biggest increase in seven months. This news slightly boosted market expectations the Fed will raise rates for a third time this year, lifting both U.S. government bond yields and the dollar.

On Tuesday, it was the retail sector that controlled the price action, today it may be the energy sector with the release of this week’s U.S. Energy Information Administration’s inventories report. It is expected to show a draw of about 3.0 million barrels. Oil is once again on the brink of breaking sharply lower, an event that could be a drag on the stock market.

It should be noted that after yesterday’s release of the bullish retail sales report, the odds of a rate hike before the end of the year jumped to 54%. On Monday, the chance of a rate hike was about 37%. If the Fed minutes are hawkish then stocks may rise because this would indicate the central bank feels the economy is strong enough to handle another rate hike.