Stocks climb ahead of Fed meeting

Investors also await a key German court ruling Wednesday. Moody's warns it could lower its rating on the US. The US trade deficit widens. McDonald's comp sales miss expectations.

By Melly Alazraki Sep 11, 2012 9:25AM
stock marketLast updated at 12:18 p.m. ET

Stocks advanced Tuesday ahead of the Federal Reserve meeting and a key decision by the German Court about the eurozone's permanent rescue fund on Wednesday.

The Dow Jones Industrial Average ($INDU) was up 78 points at 13,332. The S&P 500 ($INX) was up 6 points at 1,435. The Nasdaq Composite ($COMPX) was up 6 points at 3,110.

Moody's Investors Service said the U.S. could lose its Aaa debt rating if next year's budget negotiations do not produce a downward trend in the country's debt-to-GDP ratio. The rating stands at Aaa with an outlook of "negative." If negotiations do produce the desired trend, Moody's said it would reaffirm the U.S. rating as "stable." The U.S. dollar declined on the warning.

Trade deficit widens as exports fall
The U.S. trade deficit widened a slight 0.2% in July to $42.0 billion, just marginally above the 18-month low set June, the Commerce Department said Tuesday. Economists had expected a much sharper decline and the deficit widening to a projected $43.5 billion, according to MarketWatch.

Suffering from sluggish global and domestic demand, both exports and imports fell in July. 

The U.S. trade deficit with China widened to a record $29.4 billion in July, compared with $27.0 billion in the same month last year, and the deficit with the European Union in July was the highest since October 2007 as U.S. exports to the region slowed while EU exports flowed into the U.S. at a faster pace.

German court ruling expected
On Wednesday, Germany's Constitutional Court is set to issue a ruling on whether to allow the country to ratify the 500 billion-euro ($640 billion) European Stability Mechanism, the eurozone's new bailout fund.

While the court is expected to approve the ESM, legal experts believe it will impose tough conditions limiting Berlin's flexibility on future rescues, Reuters reported. In case the court blocks ratification of the fund, it would derail the fund and affect the European Central Bank's effort to preserve the euro.

Federal Reserve meeting begins Wednesday
Also on Wednesday, the Federal Reserve begins its two-day policy meeting. At the end of the meeting on Thursday, policymakers could announce further quantitative easing.

Investors' expectations of additional stimulus measures have increased after the release Friday of August nonfarm payroll showed a slowdown in job growth, especially after Fed Chairman Ben Bernanke's saying on Aug. 31 that "stagnation of the labor market in particular is a grave concern."

Until the court's decision and the Fed's meeting ends, investors are likely to sit on the sidelines. In Europe, stocks slid in morning trading, while Asian markets closed mixed.

The National Federation of Independent Business said its small-business-optimism index rose 1.7 points to 92.9 in August, its first rise in three months.

Stocks to watch
Shares of bailed-out insurer AIG (AIG) continued to decline after the Treasury sold about 554 million shares to the public at $32.50 apiece for a total of $18 billion. The follow-on offering was the Treasury's fifth sale of AIG stock since early last year and reduced the government's stake in the company to about 22% from 92% in early 2011, The Wall Street Journal reported.

McDonald's (MCD) reported a weaker-than-expected same-store sales rise of 3.7% in August worldwide as austerity measures in Europe and global economic volatility weighed on results. The figure was below analyst expectations for 3.9%, Reuters reported.

Hewlett-Packard (HPQ) expects to lay off 29,000 workers over the next two years, which is 2,000 more than it had originally said, according to CNNMoney.

Green Mountain Coffee Roasters (GMCR) advanced after Lavazza said in a filing after the market closed Monday that it had increased its stake in the American coffee business from 5% to 6.8 %, according to Bloomberg.

Burberry, the British fashion brand, issued a profit warning on Tuesday. Seen as a clear sign of weakness in China, other high-fashion retailers such as Ralph Lauren (RL) and Tiffany (TIF), felt the pain. 

Legg Mason (LM) said CEO and chairman Mark Fetting will step down on Oct. 1 but will remain as a consultant at the Baltimore money manager through year's end.

FedEx (FDX) and United Parcel Service (UPS) have received approval to provide express-package services in some cities in China on their own, The Wall Street Journal reported.

Apple's (AAPL) manufacturing partner in China, Foxconn Technology, is coming under renewed criticism over labor practice. The reports come just as Apple prepares to launch the iPhone 5. Sales of the new phone could add between a quarter and a half percentage point to fourth-quarter GDP in the U.S, J.P. Morgan chief economist Michael Feroli said in a note to clients on Monday, Reuters reported.

Zynga's (ZNGA) chief marketing officer resigned on Monday, becoming the latest senior executive to depart the struggling social games company.

Sep 11, 2012 10:21AM
This "opening higher ahead of FED meeting" is just plain extortion by Wall Street. Wall Street expects their QE3. Wall Street demands their QE3, their free money.

Well, it isn't "free money" to the rest of U.S. who will see not one thin dime of stimulus. The value of the U.S. dollar will take another beating. The value of my phony 401K will take another beating. The value of my savings will take yet another beating. And in these manipulated interested rates all Americans (except tor the rich) will be living off the meat instead of the fat of their lives.

Free Market Capitalism is dead. Freedom is dead. Democracy is dead. America is dead. Killed by  the FED. Killed by the criminal shyster banksters. Killed by a corrupt government. Killed by the insatiable greed and avarice of Wall Street.  
Sep 11, 2012 11:04AM
On this 9/11 anniversary, we should take some time to remember how Americans came together regardless of political affiliation.

Remember the heroes - those who di ed trying to stop the hi jackers, those who ran into burning, crumbling buildings to save people - some they didn't even know. Those who lost loved ones, friends, and co-workers. Those who volunteered to go into the wreckage to look for survivors.
Sep 11, 2012 10:13AM
America....some old advice our grandparents gave: "learn to pay your bills! You may have to do without some things...but no one trust someone who doesn't pay their bills"
Sep 11, 2012 9:50AM
 This just never ceases to amaze me: that ANYONE could consider the Fed printing more worthless toilet paper Benny Bucks as a good thing. It does not work and will not work; just digging a deeper hole into which to kick the can of reality.
Sep 11, 2012 10:05AM
How can Bernanke have the power to destroy America's greatness without any, I mean ANY accountability???  He, as well as Draghi (his European counterpart) are tag teaming the shell game of bleeding off our 401k's, IRA's, and other retirement funds by enabling the shortselling of our overvalued funds.  When they flip the shells we will know we have all been duped.  The stock market is the biggest ponzi scheme in world history.
Sep 11, 2012 10:21AM

All of this stuff, except for the possible US downgrade, has already been baked into the price of this article is nothing more than pump and dump, dump, dump, dump BS.


The Feds have already stated they are out of bullets.  There's major opposition accross Europe, to all of this German BS and by all reports, Germany isn't doing as well as they try to claim they are, which is why they are attempting this more bailout BS.


AIG?  Are they joking?  Who in their right minds is buying that crap?

Sep 11, 2012 10:32AM

Yeah he goes another round of stimulus and the first thing to go up will be the price of oil.

Even the Saudi's admit that the cost of oil is too high and that demand is low and supply is high. They are even smart enought to worry about the impace rising oil prices have on the global economy. Why will all these greedy people on SCAM STREET realize they are running AMERICA with their greed.

Stimulus does not help any one but the players on SCAM STREET.

Sep 11, 2012 11:23AM
We import about 11.4 million barrels of oil per day @ about $100 cost per barrel. Most of that petroleum is used for cars, trucks and busses. We as a country are the 3rd largest producer of oil in the world. In the mean time we have a huge almost limitless high quality supply of natural gas that is capable of safely and efficiently powering all of our transportation needs. If congress would pass legislation to fund the retrofit of all vehicles to CNG.and LNG this would eliminate the need for imported oil quite rapidly. Not only would it stop the need to import oil, but we would be one of the largest exporters. In stead, we pass stupid legislation like cash for clunkers, or subsidies for electric cars that nobody wants and aren't very cost effective. Lets face it, our trade deficit is causing our wealth as a nation to be redistributed to the rest of the world. Russia is the largest oil producing country and economically they are producing a lot of wealth due to a favorable balance of trade. The OPEC nations were third world countries before they began exporting oil. Everyone can wrangle over taxing the rich or cutting this or that spending, but the fact of the matter is, if a nation consumes more than it produces, it has a negative effect on wealth,  In this situation a nation either lowers it's standard of living, or it borrows to make up the difference which compounds the problem. Carrying on huge trade deficits year over year is a hugely flawed macro economic model. With the right energy plan and tariffs on cheap imports that would allow US manufacturers to be successful, America has the ability to turn it's economy around, get people back to work , and start creating wealth and savings.
Sep 11, 2012 9:52AM
I am hoping that "Helicopter Ben" and his European counterpart will come to their senses and stop this horrendous spending and printing effort to "save" what cannot be saved!
Sep 11, 2012 10:56AM

Re: The content of this thread:


The "market" is dead. It is irrelevant and meaningless. It is the FED, using their shills at Goldman, manipulating and pegging. There is no volume; the boys have free reign to do whatever works for the Grand Illusionist, or The Great Bearded Clam, if you prefer. And the Grand Illusionist works at the whim of the Administration, or the Trilateral Commission, or The New World Order, if you prefer. The largest bubble in the history of civilization exists, The Great Debt Bubble (worldwide), and there is no way out of it. Obama, Merkel, Dragnani, et al have no power to slowly deflate The Great Debt Bubble; Romney and the Repubs have no power to slowly deflate it. It is going to burst and we all are going to suffer. The question is not "if", it is "when".

Sep 11, 2012 11:58AM

Swagfan: "The marriage penalty was eliminated under either Clinton or Bush. Obama is bringing it back further reducing the advantage of families. Since the family unit began to crumble so too has our society.
Libs think that family units are not needed! Defense of marriage act not being enforced! No need for a father in the house - the government can be take this responsibility. Things like male nurturing - teaching boys to be responsible men - overstated. Supplying protection, income, leadership - let Washington provide it.
A recipe leading to disaster. Have you not noticed. Look at the inner cities, the crime, the filth, the poverty!"

And who do you supposed made this happen where the family is now required to have the two parents working to have a middle class lifestyle? How did we allow capitalists to continue to pay less and less until they now pay the same for two workers instead of one? How did we let them privatize profits and let society take care of our children because the parents have to work?  When will they soon require children to have to work too to survive?

Middle class used to be defined as having a house (1991, 70% of people polled), and now it's defined as having a stable job, with owning a home at forth place (meaning being a renter is now the new middle class).  The middle class has gone from having a stable job as a given, to it being the primary criteria for being middle class. The middle class has being forced to continue to reduce their expectations of a "good" life to give more money to the already wealthy class.

Sep 11, 2012 10:56AM

Why has there not been any accountability regarding the $800+ Billion STIMUILUS?  Because there was so much waste and fraud - PLUS a lot went to states to help balance their budgets for 1 YEAR - so they did not have to lay off people.  States did not utilize the money the way they should have, and knew after one year they would have to bite the bullet.  This is good for politics but not reality.  So - how did this all go toward creating sustainable jobs - IT DIDN'T - but this was the real purpose. 


So again President Obama - please give us a full account of how these long term borrowed dollars were spent for short term gain?


Talk about a tax hike -


The social security withholding that President Obama reduced from your paycheck from 6.20% to 4.20% as of Jan. 1, 2011 expires December 31, 2012.  Including the Medicare part of  withholding (1.45%), you are paying 5.65%, will increase back to 7.65%.  If you make $50,000 a year this will mean you will receive $1,000 less a year or $19,23 a week.  AND FOR THOSE SINGLES making over $200,000 and MARRIED COUPLES making over $250,000 a year, you will pay an additional 0.90% Medicare Tax on income above these levels starting January 1, 2013.  This means once you reach these respective income levels, you will pay 2.35% tax on every dollar earned above the above mentioned levels rather than 1.45%.


SO, President Obama - you say there is no tax increase on the MIDDLE CLASS - you are a liar.. 


The social security tax for 2012 is paid on the first $110,100, but the medicare tax is paid on every dollar earned.  The $110,100 cap on social security is bound to increase in 2013 as it has every year for some time. 

Sep 11, 2012 11:22AM
As I have alluded to many times recently.  Our representative form of government has been overthrown.  We are now at the mercy of an organization of individuals many of us probably do not know or even recognize by name.  They are unelected yet have our future directly in their hands. To sit here every day and hear folks argue this Dem/Rep nonsense is so very disheartening.  If you have this sense of powerlessness like I and many have ask yourself why.  There are no longer any straight answers out of Washington, there are no answers to be found because noone knows exactly who is in charge or who knows what the plan is either short term or long term.  Now lets hear one more time how you care about your kids and grand kids and tell me who you think is in charge and what the goal is.  What is the economic plan for this country?  Anybody anybody have any idea?
Sep 11, 2012 10:13AM

"Stocks open higher ahead of Fed meeting"


Looks like stimulus is going to be the next bubble to burst.


It appears the market is high on the drug stimulus and may be approaching overdose.

Sep 11, 2012 12:03PM
Obama said he was going to be a different President ... he sure is .... he's on his way to being worse than GWBush ... 4 wasted years, unemployment, poverty, no homes, skyrocketing gas ... no budget, no authority ,,, yes, a Moron
Sep 11, 2012 9:53AM
Sep 11, 2012 10:50AM

I want my QE !! Do you think I'll get any? I have excellent plans for the funds; putting them to work in several Florida east coast manufacturing business' or creating new business opportunities in my area. But do you think he'll give some to us instead of the mismanaged banks ? NOOOOOOOO!

So if I can't have any for JOB GROWTH ( or your area too), then  nobody else should either. We don't need to be artifically inflated / debased anymore and this decision should not have anything to do with the troubles in the EU.

Sep 11, 2012 10:42AM

America sure like a bubble, right?


>>>>Looks like stimulus is going to be the next bubble to burst. It appears the market is high on the drug stimulus and may be approaching overdose. <<<<

Sep 11, 2012 10:42AM
"This "opening higher ahead of FED meeting" is just plain extortion by Wall Street. Wall Street expects their QE3. Wall Street demands their QE3, their free money."

What they aren't expecting is-- that we Close the banks, end the Federal Reserve and get rid of Wall Street, so we can invest 100% in job recovery. So let's bet on that.
Sep 11, 2012 11:48AM

When did the Democrats passed a budget?..........morons.


Moody's warns it could lower its rating on the US. The US trade deficit widens.

This is all because of OBAMATHEMATICS which will ruin us and the US

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