US Market cautious ahead of crucial meeting

Traders are aware that their dream might not be totally fulfilled

US Market witnessed cautious trading today, Monday, September 17, 2007 marked by lower than normal volume. Many traders stayed away ahead of Federal Reserve’s crucial meeting on interest rates tomorrow. Nine of the ten sectors ended the day with losses. Energy made the sole advance with oil prices crossing $80/barrel.

The Dow Jones industrial Average closed lower by 39 points at 13,403.42. The Nasdaq Composite Index, finished lower by 20.5 points at 2,581.66. S&P 500 finished lower by 7.6 points at 1,476.65.

Twenty-one out of thirty Dow stocks ended in red today. CoCo-Cola was the main Dow laggard. GM was one of the few Dow winners.

Financial stocks were heavily hit today. Bank of America acknowledged late in the session that credit market turmoil is expected to have a "meaningful impact" on its third quarter investment banking results.

Things kicked off on a sour note today after Microsoft shares slid 1.2% after a European court rejected the software giant's appeal of a 500 million euro fine.

General Motors shares were up almost 3% after the automaker continued contract talks with the United Auto Workers.

E*Trade says that its 2007 profit will be a third less

Market is expecting a 25-50 bps cut in interest rate in fed fund rate. The fed funds rate is the rate that banks to charge each other for overnight loans and is a key rate used to price everything from corporate loans to credit card rates.

But at the same time, market knows that their dream of 50 bps might not come through and they have to remain happy with only the 25 bps cut.

A surprising piece of news came from E*Trade, best known as an online brokerage, which announced that its profit for 2007 will be a third less than previously expected because of the mortgage crisis.

Trading volumes were lighter than usual, with some investors opting to sit out of the action ahead of the Fed meeting Tuesday. Volume at the New York Stock Exchange topped 1.1 million shares, with declining stocks outpacing advancers 11 to 5. At the Nasdaq, more than 1.4 billion shares exchanged hands, and declining issues topped advancing stocks 5 to 2.

Crude ends above $80 for the second time

Crude oil future prices once again rose today and reached another all time new high. Crude prices closed above $80/barrel for the second time after traders continued with their speculation that U.S. oil and gasoline stockpiles extended declines as refiners slowed operations.

Crude-oil futures for light sweet crude for October delivery closed at $80.57/barrel (higher by $1.47/barrel or 1.9%) on the New York Mercantile Exchange. The contract had dropped to a low of $78.80 early in the session but then rebounded as high as $80.70.

Today, Goldman Sachs said its analysts raised their year-end forecast for oil prices to $85 a barrel for 2007 and pegged the year-end price at $95 a barrel for 2008.

Tomorrow is a crucial day for the market as Federal Open Market Committee will announce the latest on interest rate cut at 2.00 P.M. Prior to that, Lehman Brothers will come out with its earnings report. Other than that, there will be a number of economic reports to dictate market momentum. Most important among them will be the Producer Price Index at 8:30 ET will offer insight into inflationary pressures at the production level.