Fed Walks Economic Tightrope

The markets aren't sure whether to buy the idea that the U.S. economy is heading toward recession.

It's hard to blame traders when economists and the Federal Reserve are so divergent about the economic future. Wednesday may bring some enlightenment in the form of the Fed's beige book, its intermeeting report on the state of the economy.

On the strong side, analysts expect third-quarter growth to be revised to around 5% on Thursday. Job growth has remained sturdy despite a second leg down in the housing market and financial market turmoil that's gripped the second half of the year. And Fed speakers have been cautiously trying to bat back expectations for more fed funds rate cuts. ...