A tame open for a change awaiting FOMC news

Small-cap stocks chopped back and forth near steady levels in a relatively calm open, as support from gains in equity markets around the world were countered by mild profit-taking from short-term traders who caught the rally from Tuesday afternoon and weren’t willing to hold that risk through the big FOMC event later today. At 9:51 a.m. ET, the Russell 2000 (NYSE:IWM) was up 1.59, or 0.33%, at 484.14.

The durable goods report came in above expectations, with a gain of 0.8%, compared with the forecast for a slide of 1.1%. However, the previous month’s data was revised downward, which took some of the bullish edge off the number. The market initially extended overnight gains on the headline figure, but quickly sliced away that advance.

Also on the data front, the MBA Mortgage Application Index jumped 16.8%, but remains 30% below year-ago levels and is hovering near 8-year lows as the housing market remains mired in a slump.

Now that the modest morning data is out of the way, the market will be free to focus on what the Federal Reserve will do this afternoon and what the statement accompanying the rate cut will mean to the market. Fed funds futures have priced in a 100% chance for a 50-basis-point cut and were even pricing in about a 40% chance for a 75-bp cut. Although about 70% of economists were forecasting a 50-bp cut today by the Fed, there is still a minority out there looking for just a 25-bp cut.

Rate cut fever is certainly in the air today, and not just because of anticipation ahead of the big Fed announcement. Overnight, central bank officials in China cut rates by 0.27%, marking the third rate cut in six weeks by the fourth-largest economy in the world. Earlier this week, officials with the European Central Bank seemed to hint that rate cuts were quite possible in the near-term. Investors are hoping that the rate cuts around the world will further thaw the frozen credit market, adding to . . .

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