Stock Market Likes Certainty – Can Fed Deliver That?

Stock market participants hunkered down early Thursday as a hurry up-and-wait climate colors trading ahead of the Federal Reserve's afternoon rate decision. It's a complicated situation that's likely to keep stock volatility elevated. The Fed must maintain market confidence while keeping its independence; it needs to focus on U.S. job growth and no-show inflation, but can't ignore China's issues. Inaction might invite stock market relief, or does it risk sparking fresh worries that the economy isn't as solid as we all thought? Wednesday's respectable advance left the major stock averages with nearly 2% gains so far this week. But the short-term fate of those gains is uncertain as Janet Yellen and crew deliberate what looks to be the closest interest rate call in recent memory. An announcement is due for release at 2 p.m. Eastern. Janet Yellen follows the release with a press conference that could help markets decipher the Fed's policy course in October, December, and into 2016. That means even a no-move vote might not slam the door shut on market volatility—there will be plenty to read between the lines. Some economists think that Yellen will spend time assuring the public (that's you Wall Street) that a rate hike is not a death sentence for the economy. She'll likely emphasize that the Fed's "bias" toward higher rates is simply a reflection of an improved economy that no longer warrants the Fed's "emergency" policy tied to the recession. The Fed chief is also likely to be pressed to explain why inflation remains so low. It's clear that the bond market is readying for higher rates—at least at some point. Yields (aka interest rates) on two-year Treasury notes shot up to a four-year high earlier this week. The Fed acts independently, of course, yet can't ignore the global economy and interest rate differentials. Fed counterpart, the Swiss National Bank (SNB), skipped the policy surprise this time. The SNB kept its benchmark interest rate on hold Thursday at a record low of -0.75% as was widely expected. In January, the SNB rattled markets when it removed the upper limit on the Swiss franc; the franc promptly soared. In its statement today, policy makers said: "Overall, the Swiss franc is still significantly overvalued, despite a slight depreciation. Negative interest rates and the SNB's willingness to intervene as required make investments less attractive...easing pressure on the franc." And in a positive sign for Europe's economy, the Swiss government lifted its GDP forecast. Want a little history? The S&P 500 (SPX) has fallen in immediate response to the start of a Fed tightening cycle in three of the past five instances. It logged an average directional move of 1.4%.

Find out how rising interest rates might impact your portfolio. Watch the webcast replay below from September 15, featuring TD Ameritrade's JJ Kinahan, for perspectives on stocks, and Craig Laffman, for perspectives on fixed income.

Construction on new U.S. homes moderated over the past two months after stronger gains earlier in the summer. Housing starts fell 3% to an annual rate of 1.13 million units in August. Keep in mind: starts are up 16.6% from August 2014. Meanwhile, permits for new construction, a potential sign of future demand, rebounded 3.5% to an annual rate of 1.17 million units; they dropped 15.5% in July.

A deadly 8.3 magnitude earthquake off the coast of Chile is a reminder of the uncertainty that can hit markets at any time. Because Chile is the world's largest copper producer, copper prices rose to two-month highs in overnight trading as traders worried about potential supply disruptions.

In what's at least the second big global deal this week, French media giant Altice has confirmed it will buy Cablevision (CVC) for around $10 billion, or $34.90 per share, in a cash transaction, pending approvals. The deal price marks a 22% premium to Wednesday's closing price for CVC. The combination now represents the fourth-largest cable operation in the U.S. market, according to the companies. Good trading, JJ