Market Waiting on Fed This Morning

The market's lying low this morning ahead of today's

Federal Open Market Committee

meeting.

You could certainly

make the argument that a tightening today would be the best of all possible worlds for stocks. Such a one-time shock would clear the market's mind for what promises to be an extremely strong third-quarter earnings season. With Y2K liquidity concerns holding the Fed's hand, stocks could rally with the cleanest of consciences.

What do you think the Fed will do today? And how will the market react? Tell us on

TSC

Message Boards.

But that doesn't seem to be a likely scenario. The consensus is overwhelmingly against the likelihood that the Fed will raise rates today, with only one of 30 primary dealers expecting a hike, according to a

Reuters

poll. The real question on Wall Street's mind is whether the Fed will adopt a tightening bias, and that issue seems pretty much up for grabs at this point. Nearly half of those polled dealers see a shift in the Fed's policy bias from neutral to tightening, a move that easily could tie the market to its Fed-watch post until the FOMC meets again in November.

As for the third scenario, no hike and no change in the Fed's neutral policy bias, stocks should rally. But it's tough to say how many more ladies are in the chamber after yesterday's rally, which may have capped today's upside potential for stocks.

The FOMC meets at 9 a.m. EDT and will post any change in rates or policy bias around 2:15 p.m.

Right now, stock futures are doing the prudent thing: nothing. At 8:10 a.m., the

S&P 500

futures were down 1.1, near fair value and indicating a flattish open.

In case anyone out there is watching individual company news this morning, today's headlines are led by a doozy:

Sprint's

(FON)

acceptance of

MCI WorldCom's

(WCOM)

sweetened $115 billion takeover bid.

The 30-year Treasury was down 6/32 to 100 10/32, its yield rising to 6.101%.

Gold was exploding higher this morning, lately quoted at $337 an ounce, up from a New York close of $316.40 an ounce.

Trading was light overnight in the big Asian markets ahead of today's FOMC meeting. Stocks endured a mixed session in Tokyo, the

Nikkei

managing to edge up 20.44 to 17,784.15. Decliners squashed advancers 811 to 391 on the

Tokyo Stock Exchange

.

The dollar continued to firm against the yen in overnight trading, moving above the 106.5 yen level. The

Bank of Japan

ratcheted the yen surplus it leaves daily in the money markets down another notch, this time from 1.5 trillion yen to 1.2 trillion yen, as the need for additional liquidity to accommodate last week's half-year fiscal end diminishes.

The greenback was lately quoted at 106.61 yen.

In Hong Kong, the

Hang Seng

gained 123.03, or 1%, to 12,998.89, underpinned by gains in property stocks and index heavyweight

China Telecom

, which set plans to spend HK$49.7 billion to expand its mobile-phone business in China.

The big European indices were higher at midday. Frankfurt's

Xetra Dax

was up 32.04 to 5250.90, while the Paris

CAC

was up 28.16 to 4631.40. London's

FTSE

had moved 11.4 higher to 6064.3.

Tuesday's Wake-Up Watchlist

By

Tara Murphy

Staff Reporter

Mergers, acquisitions and joint ventures

Ashland

(ASH) - Get Report

said it is considering strategic options for its

Arch Coal

(ACI) - Get Report

division. The company said that a tax-free spinoff of the unit appears to be the most viable alternative, but it is in talks with a special committee of Arch Coal board members to discuss other solutions.

Boeing

(BA) - Get Report

said that it inked a $2 billion agreement with

DHL

to change 44 jets into freighters, while providing ongoing maintenance for the international delivery service,

The Wall Street Journal

reported.

British Airways

(BAB) - Get Report

said that it would provide 34 of the 44 Boeing 757-200 aircraft used in the deal.

DTE Energy

(DTE) - Get Report

unveiled plans to buy

MCN Energy

(MCN) - Get Report

in a cash-and-stock deal valued at $2.6 billion. The agreement calls for DTE to pay $28.50 for each share of MCN. DTE said, including MCN's debt, the acquisition is worth roughly $4.6 billion.

Intel

(INTC) - Get Report

said it plans to acquire

IPivot

for $500 million.

iXL

(IIXL)

said it has inked a $120 million deal to buy

Tessera Enterprises

.

MCI WorldCom said it has forged a $115 billion deal to acquire the No. 3 long-distance carrier Sprint in the largest corporate buyout ever.

The Wall Street Journal

reported that MCI WorldCom upped its offer to rival

BellSouth's

(BLS)

higher bid. According to the agreement, MCI WorldCom said it would pay $76 in stock for each Sprint share, while each share of

Sprint PCS

(PCS)

would be exchanged for 1 new

WorldCom PCS

tracking stock. After the merger, MCI WorldCom said Sprint CEO William Esprey would serve as chairman, while MCI WorldCom CEO Bernard Ebbers has been tapped as president and CEO.

TheStreet.com

wrote about what BellSouth's next move might be in

a story last night.

Separately,

Deutsche Telecom

(DT) - Get Report

said it would not enter a rival bid for Sprint and said it would sell its 10% interest in the company after MCI WorldCom has forged a deal to acquire Sprint. A spokesman for Deutsche said the telecom company would rake in a $7.5 billion profit from the sale.

Earnings/revenue reports and previews

Foundry Networks

(FDRY)

said it will post third-quarter revenue between $36 million to $38 million, beating internal expectations.

Micron

(MU) - Get Report

posted a fourth-quarter loss after yesterday's close of 7 cents a share, which included $600,000 from an issuance of unit stock and an income-tax benefit of $7.4 million. The loss was less than the 21-analyst estimate of an 18-cent loss and the year-ago loss of 43 cents.

Selective Insurance

(SIGI) - Get Report

said it would report third-quarter earnings between 8 cents and 14 cents a share, greatly missing the four-analyst estimate of 45 cents a share and the year-ago 43 cents.

Talbots

(TLB)

said it expects to post third-quarter earnings of between 56 cents and 60 cents a share, beating both the 14-analyst estimate of 51 cents and the year-ago 40 cents.

Analyst actions

PaineWebber

rolled out coverage of

A.H. Belo

(BLC)

with an attractive rating.

Morgan Stanley Dean Witter

upped its rating on

Electronics For Imaging

(EFII) - Get Report

to strong buy from outperform.

PaineWebber started coverage of

Medicis Pharmaceutical

(MRX)

with an attractive rating.

Warburg Dillon Read

began coverage of

Juniper Networks

(JNPR) - Get Report

with a buy rating.

Morgan Stanley sliced its rating on

SunGard Data

(SDS) - Get Report

to neutral from strong buy.

PaineWebber initiated coverage of

Tribune

(TRB)

with a buy rating.

PaineWebber sliced its rating on

TV Guide

(TVGIA)

to attractive from buy.

Miscellany

American Express

(AXP) - Get Report

said it plans to introduce an online trading and financial advisory service called

American Express Brokerage

this fall.

Ametek

(AME) - Get Report

announced its plans to divide its electronic instruments division into two subunits. The division will be split into an aerospace and heavy vehicles unit and a process and industrial products group.

Wal-Mart

(WMT) - Get Report

said it plans to launch an aggressive expansion, which includes opening 40 new discount stores as well as 160 to 165 new supercenters. Separately, the company posted an October same-store sales increase of 7.2%, down from the year-ago 9.5% increase, while total sales were $15.7 billion, beating the year-ago $12.4 billion.

As originally published, this story contained an error. Please see

Corrections and Clarifications.