Amid Uncertainty About Fed, Stocks Look Higher at Open

Market watchers are as split on a rate hike as they've been in quite some time.
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The

Federal Open Market Committee

is set to cloister itself in the Marriner S. Eccles Building in Washington to decide the fate of short-term interest rates. And although that fate is as uncertain to market observers as it's been in a good long while, the stock market is preparing to start the trading session in rally mode.

At 9 a.m. EST, the

S&P 500

futures were up 7, more than 10 points above fair value, and indicating that stocks will see a strong wave of buying at the open.

What's behind that optimism? People started talking up the possibility of the Fed not raising rates about three weeks ago, when the

Employment Cost Index posted a smaller-than-expected increase. Since then we've seen a friendly

jobs report, stellar productivity and unit labor cost

figures, and nearly one hike's worth of yield -- around 25 basis points -- gone off the long bond. Not to mention a 12% gain in the

Nasdaq Composite Index

.

The problem is that we're really no closer to a consensus on we'll see today at 2:15 p.m., when the Fed will announce any changes in monetary policy. The latest

Reuters

poll of 30 primary dealers of government bonds is evenly split between those expecting a hike and those not. In fact, one measure of bond market sentiment has actually grown more cautious in recent days: After pricing in a 50% chance of a rate hike last Tuesday, the November

fed funds futures contract is now putting the odds at more than 80%.

It's possible that the Fed decision just doesn't matter that much to the market right now. At least that's become the conventional wisdom on Wall Street in the past week or so.

"We're going to get a rally whichever way they decide," said Jim Benning, a trader at

BT Brokerage

. "If they do raise them, they'll probably go to a neutral bias, which would be viewed favorably by the market. If they don't raise them, I think that's also positive. People would assume that they're done for now."

The bond market was inching higher. The 30-year Treasury was up 7/32 to 101 17/32, putting its yield at 6.013%.

None of the day's economic data will garner much attention with the Fed meeting. Tomorrow the

Consumer Price Index

will give the market its latest read on inflation in the U.S. economy.

In Europe, the large indices were turning higher along with the U.S. stock futures in quiet early-afternoon trading. London's

FTSE

was up 29.7 to 6563.3, while Frankfurt's

Xetra Dax

was 7.96 higher to 5867.25. Re-emerging in positive territory after some early weakness, the indomitable Paris

CAC

was up 7.58 to 5185.71.

Asian markets were mixed overnight. In Tokyo, stocks edged lower as investors took profits in recently surging telecoms ahead of today's FOMC meeting. The

Nikkei

sank 42.95, or 0.2%, to 18,155.14. The dollar firmed modestly against the yen in Tokyo trading, moving up from 104.8 yen to above the 105-yen level. The greenback has continued to add strength, lately quoted at 105.74 yen.

Investors were more optimistic in Hong Kong, although the island's interest rates effectively track those in the U.S. That's largely because of yesterday's

developments in China's bid to enter the

World Trade Organization

. That boosted sentiment enough to help the

Hang Seng

rise 127.24, or 0.9%, to 14,689.46. The benchmark index was again led by constituent

Hutchison Whampoa

, whose telecommunications operations are considered to have an inside line on penetrating the mainland telecom industry.

Tuesday's Wake-Up Watchlist

By

Tara Murphy

Staff Reporter

Mergers, acquisitions and joint ventures

America Online

(AOL)

said it plans to roll out its Brazilian Web site today, establishing a presence in Latin America. AOL, along with its regional collaborator, Venezuela's

Cisneros

media group, said it plans to invest $200 million in Internet access service and local Web pages in Latin America.

Boeing

(BA) - Get Report

handed

Raytheon

(RTN.A)

a contract for more than $1 billion to produce five-control radar that would be put into the Navy's next-generation fighter jet,

The Wall Street Journal

reported. According to the

Journal

,

Northrop Grumman

(NOC) - Get Report

competed with Raytheon for the deal.

Comcast

(CMCSK)

and

Time Warner

(TWX)

announced plans to exchange Comcast's Lake County and Tallahassee, Fla., cable systems for Time Warner's Indianapolis system.

E.piphany

(EPNY)

announced plans to purchase

RightPoint

for 3.5 million shares.

Pfizer

(PFE) - Get Report

stepped up its

efforts to throw a wrench into the proposed merger of

Warner-Lambert

(WLA)

and

American Home Products

(AHP)

.

Yesterday, Pfizer filed an amendment to its Nov. 4 lawsuit against Warner-Lambert and American Home Products, to request that their proposed merger be blocked by a Delaware court until Warner considers Pfizer's competing offer. Pfizer also wants the court to grant it the right to wage a proxy fight to unseat the current Warner board, to reduce the size of the board to seven directors and to elect an independent slate.

The amendment comes ahead of Pfizer's scheduled meeting with analysts today to discuss pipeline drugs and projected earnings growth.

Vodafone AirTouch

(VOD) - Get Report

said it would begin talks with investors this afternoon regarding what price it should bid for

Mannesmann

(MNNSY)

. According to

Reuters

, CEO Chris Gent said during a telephone conference call that the company's board plans to convene Thursday and launch a new bid for Mannesmann, which refused Vodafone's initial $106 billion offer Sunday.

In other Mannesmann news, the company has sued

Goldman Sachs

(GS) - Get Report

, claiming a conflict of interest in Goldman's advisory relationships, reported in

The Wall Street Journal

.

Earnings/revenue reports and previews

AnnTaylor

(ANN)

posted third-quarter earnings of 65 cents a share, in line with the 13-analyst estimate and up from the year-ago 50 cents.

BJ's Wholesale

(BJ) - Get Report

posted third-quarter net income of 31 cents a share, beating the eight-analyst estimate of 25 cents and the year-ago 19 cents.

Bob Evans

(BOBE)

posted second-quarter earnings of 37 cents a share, matching both the two-analyst estimate and the year-ago report.

Charlotte Russe

(CHIC) - Get Report

posted fourth-quarter earnings of 22 cents a share, beating the three-analyst estimate of 20 cents and up from the year-ago 8 cents.

Cost Plus

(CPWM)

reported third-quarter earnings of 2 cents a share, beating the four-analyst estimate of a 1-cent loss and the year-ago 4-cent loss.

Gadzooks

(GADZ)

reported third-quarter earnings of 6 cents a share, beating the six-analyst estimate of 4 cents and up from the year-ago 8-cent loss.

Home Depot

(HD) - Get Report

reported third-quarter earnings of 37 cents a share, beating the 22-analyst estimate of 35 cents and the year-ago 26 cents.

J.C. Penney

(JCP) - Get Report

posted third-quarter earnings of 51 cents a share, beating the 11-analyst estimate by a penny but down from the year-ago 68 cents.

Lycos

(LCOS)

reported first-quarter pro forma earnings after yesterday's close of 1 cent a share, in line with the 18-analyst estimate and up from a year-ago loss of 3 cents a share. The company told analysts that acquisitions will remain an important part of its growth in the coming months. In premarket activity, Lycos was trading up from Monday's closing price of 59 7/8 to 63. For a closer look at the

results, check out the story from

TheStreet.com/nytimes.com

joint newsroom.

Staples

(SPLS)

posted third-quarter earnings of 20 cents a share, beating the 22-analyst estimate by a penny and up from the year-ago 15 cents.

Tiffany

(TIF) - Get Report

posted third-quarter earnings of 29 cents a share, beating the 18-analyst estimate of 25 cents and the year-ago 17 cents.

Offerings and stock actions

The initial public offering of communications software developer

Quintus

(QNTS)

was priced at $18 a share, above the expected $15-to-$17 estimated range. Lead underwriter

Donaldson Lufkin & Jenrette

said the number of shares was raised to 4.5 million from 4 million.

Analyst actions

Warburg Dillon Read

upped its rating on

CVS

(CVS) - Get Report

to a buy from a hold.

J.P. Morgan

rolled out coverage of

Sycamore Networks

(SCMR)

with a buy rating.

Miscellany

CK Witco

(CNW)

said it plans to reduce its workforce by 500, in an effort to save $40 million.