NEW YORK – Wall Street headed for a modestly higher open Tuesday ahead of the Federal Reserve's interest rate decision — which some investors believe will bring the key U.S. rate to the lowest level on record.
Most economists are anticipating a half-point rate cut in the federal funds rate target from 1 percent to 0.5 percent, but many in the market have been pricing in an even larger cut to an all-time low of 0.25 percent.
The move could end up being more symbolic than anything — the fed funds rate target helps determine the rate at which banks lend one another the reserves they keep at the Fed. And that actual rate is already below 0.25 percent. Still, a big move in the target rate, and an accompanying statement pledging further action to fight the financial crisis roiling the economy, may reassure investors concerned that the government is running out of ammunition.
Meanwhile, investors are also eager to pore over Goldman Sachs Group Inc.'s fiscal fourth-quarter financial results. Analysts are anticipating the bank to post a loss of $3.73 a share.
Ahead of the market's open, Dow Jones industrial average futures rose 8, or 0.09 percent, to 8,589. Standard & Poor's 500 index futures rose 2.30, or 0.26 percent, to 874.60, while Nasdaq 100 index futures rose 6.75, or 0.56 percent, to 1,201.75.
On Monday, the stock market pulled back moderately as investors, while optimistic that the nation's floundering automakers will get federal aid from the government sometime soon, grew nervous about the growing list of firms and individual investors affected by investment manager Bernard Madoff.
Madoff, former chairman of the Nasdaq stock market, was arrested Thursday for orchestrating what prosecutors allege was a $50 billion Ponzi scheme to defraud investors. Firms invested in his fund include such major European banks as HSBC Holdings PLC, Banco Santander, BNP Paribas, and Royal Bank of Scotland Group PLC.
Demand for government bonds remained high early on Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.49 percent from 2.53 percent late Monday. The yield on the popular three-month T-bill — whose yield has at times gone negative due to frenzied buying — rose to 0.04 percent from 0.02 percent late Monday.
In economic data Tuesday, the government is expected to report that new home construction and building permit applications fell for the fifth straight month in November to the slowest rate in decades. Economists also anticipate the government to report a sharp decline in last month's consumer prices.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 18 cents to $44.69 a barrel in electronic premarket trading on the New York Mercantile Exchange.
Markets overseas were mixed. Japan's Nikkei stock average fel 1.12 percent, while Hong Kong's Hang Seng index rose 0.55 percent. In late morning trading, Britain's FTSE 100 rose 0.14 percent, Germany's DAX index rose 1.33 percent, and France's CAC-40 rose 0.54 percent.