Waiting for the FOMC Statement

Economic Data

- (US) Aug CPI M/M: -0.2% v 0.0%e; Y/Y: 1.7% v 1.9%e
- (US) Aug CPI Ex Food and Energy M/M: 0.0% v 0.2%e; Y/Y: 1.7% v 1.9%e
- (US) Aug CPI Index: 237.852 v 238.262e; CPI Core Index SA: 238.345 v 238.597e
- (US) Q2 Current Account Balance: -$98.5B v -$113.4Be
- (US) Sept NAHB Housing Market Index: 59 v 56e
- (US) DOE Crude: +3.67M v -1Me; Gasoline: -1.64M v 0Me; Distillate: +0.28M v +0.5Me

- Yesterday's rally continued in the European session (Asia was mixed), helping goose US stocks higher in the early going today. As of writing the DJIA is up 0.12%, the S&P500 is up 0.09% and the Nasdaq is up 0.13%.

US CPI inflation barely had a pulse in August. Both unadjusted and core figures fell lower, on both a sequential and y/y basis. This tees up another reason for the Fed to make no changes today, although the guessing game about possible changes to the FOMC statement has obsessed markets for a week now. Overnight, Goldman Sachs wrote that it does not expect the Fed to remove or modify the "considerable time" line from the statement.

The September NAHB index of homebuilder sentiment rose to a nine-year high in a report out this morning, racking up its fourth consecutive increase in the series. While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from millennials and first-time home buyers, said the NAHB. Separately, Lennar crushed expectations in its third quarter report, with double-digit gains in new orders and the backlog. LEN is up 6.5%, while other homebuilders are up 4-5% a piece.

The pound has continued softening over the last 24 hours despite the polls out last night suggesting that the no vote is in the lead ahead of tomorrow's Scotland independence referendum. In addition, the percentage of undecided voters has narrowed a bit in a few polls. GBP/USD tested 1.6050 yesterday but has moved firmly up to 1.6350 during the US morning. The minutes from the September BoE meeting showed MPC members highlighting downside risks to growth in Q4 due to the stagnation in the Eurozone and arguing there are insufficient price pressures to justify a rate hike.

Steel names are up this morning after US Steel said it would not proceed with a planned expansion at its iron ore pellet operations in Minnesota. As a result, US Steel said to expect Q3 results significantly higher than current consensus EPS estimates. The company said market conditions in the US have remained stable and operations have performed well. Additionally, Nucor offered very strong Q3 results and also cited good market conditions. X is up 8% but well off its best levels, while NUE and STLD are both up 4% or so.

Biotech name Auxilium Pharmaceuticals is up more than 40% after receiving an unsolicited, non-binding proposal from Endo International at $28.10/shr. The company adopted a shareholder rights plan and also said the board would look at the offer in light of its standing agreement to be acquired by QLT, Inc. In other deal news, a Rackspace executive responded to rampant takeover chatter heard over recent sessions by affirming his company's plan to remain independent. Shares of RAX ard won more than 15% this morning. 

Looking Ahead

- 14:00 (US) FOMC Interest Rate Decision