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Stocks Get a Lift, Street on Fed Watch

Wall Street is counting down to next week's Fed meeting and not much else is influencing trading. Stocks are readying for a higher opening as investors wait for a speech from Fed Chairman Ben Bernanke later this morning and watch the action at OPEC.

European stock markets are firmly in the green after an up day for most of Asia's stock markets. China's stock market was the one exception. The Shanghai index closed 4.5% lower after reports that Chinese consumer prices rose 6.5% in August, the highest inflation rate in 10 years.

Today is a solemn day on Wall Street as 9/11 is remembered.

Stock Swings
The Dow ended yesterday a wimpy 14 points higher at 13,127 after a day that saw much higher highs and of course much lower lows with the index swinging well into negative territory. The Nasdaq was down 6.59 points, giving up big early gains on the back of Intel's raised forecast. The S&P 500 slid 1.85 points.

The dollar traded near 15-year lows this morning, after falling 0.2% yesterday against the euro, putting its decline for the year to date at 4.3% against the euro. The dollar gained slightly yesterday against the yen but is still off 4.5% against the Japanese currency year-to-date.

Fed Watchers
Who is not a Fed watcher these days? Everybody seems to have a view on when and how the Fed will act on interest rates. Therefore, every word coming out of the mouths of Fed officials is weighed and counter-weighed for every nuance.

This week's parade of Fed speakers started yesterday with comments from Atlanta Fed President Dennis Lockhart, who said the Fed has to take Friday's nasty jobs data very seriously and that it is closely watching the consumer. Then San Francisco Fed President Janet Yellen said market turmoil has added "appreciably" to downside risk for the economy. But countering that was Dallas Fed President Richard Fisher, who said he believes the economy seems sound and appears to be still weathering the storm. Speaking later yesterday was Fed Gov. Frederic Mishkin. He also worries that market chaos could spill over into the economy.

Half-Point Rate Cut?
CNBC senior economic correspondent Steve Liesman said Yellen's use of the word "appreciably" was key. "Using that adverb says to me that maybe that's a Fed president that thinks the Fed ought to cut," said Liesman, who says Mishkin's comments signaled the same.

Liesman says the Fed could even trim more than the anticipated 25 basis points from the Fed funds rate when it meets next week.

"There's a sense among some on the Fed that they are behind the curve, and it's quite possible they could cut 50 basis points to catch up," said Liesman.

Today, we hear from the Fed head himself. Bernanke hopefully will shed more light on what the Fed's view might be when he speaks to a Bundesbank conference in Berlin, Germany. The topic of his 11 am New York time speech is "Global Imbalances: Recent Developments and their Implications."

Recession
Liesman continues his coverage from the National Association for Business Economics annual meeting in San Francisco, where a big topic of discussion is whether the U.S. is heading for a recession. Over 60% of economists in a NABE survey say recession is a major risk. Economists also cut their growth forecasts for 2008 to 2.8% from 3.1%.

CNBC's Larry Kudlow says, interestingly, the stock market says there's no recession for now. "So far, the stock market is not signaling a recession. It's only a 5% or 6% correction. It's up about 5% year to date. In '87, you had a more pronounced drop. The recession forecasters may be right, but you just don't see it in the stock market," said Kudlow.

Over a Barrel
Today's big focus in the energy markets is the action, or lack thereof, at OPEC's meeting in Vienna. Unlike some recent meetings, oil ministers were coy, keeping reporters guessing on what they will do with production quotas. The Saudis, usually big talkers, were suspiciously quiet yesterday. The Algerian oil minister late yesterday said no decision had been made. He joins other ministers from Venezuela and Libya who say no action is necessary.

"I was a little surprised there was any consideration of an increase. They were cheating to the tune of 900,000 barrels so a quota increase of 500,000 would obviously just legitimize current production levels," said MF Global senior vice president John Kilduff. "There's chatter about it from various oil ministers."

Oil finished higher yesterday, reversing early losses, as news of a Kurdish separatist group's attack on a gas pipeline between Iran and Turkey added to nervousness. The market was already on edge after Mexican pipelines exploded in an act of sabotage.

Oil closed at $77.49, up 1%, but it moved even higher, above $78 a barrel in afterhours trading. Today, crude is slightly higher.

CNBC's Rebecca Jarvis said traders at NYMEX talked about how General David Petraeus' testimony before Congress included emphasis on Iran.

"There was that and the talk about the military base being built on the border between Iraq and Iran has traders feeling that something's going to happen here," she said. "The U.S. military has been pointing fingers at Iran. It's been hair trigger for some time," said Kilduff, a CNBC contributor.

Stocks in the News
In a good sign for tech today, Ericsson shares jumped 4.1% after it said the market for mobile network technologies would grow about 5% this year and the company was gaining market share. Nokia stock was up also.

Big Pharma Cries to Congress
CNBC's pharmaceutical reporter Mike Huckman reports today on an FDA Advisory Committee's consideration of new regulations for the use of anemia drugs for kidney dialysis. Interestingly, the anemia drugs, marketed by Johnson and Johnson and Amgen are the highest single drug expenditure for Medicare, which now restricts reimbursement for dialysis patients.

The Senate meanwhile has passed a resolution urging Medicare to allow dialysis patients to get reimbursement for the drugs.

"We're taking a look at whether this is precedent setting ...whether pharma can run to Capitol Hill when it doesn't get its way," says Huckman. As far as the Senate, "it actually passed a resolution as opposed to just writing letters. It's non-binding but it is precedent setting in that they actually passed a resolution."

The anemia drugs provide billions in revenue for both companies. In addition to kidney dialysis, the drugs are also used by patients suffering anemia from chemotherapy treatments.

9-11 Remembered
Wall Street today sadly remembers the thousands killed in the World Trade towers, in the Pentagon and in Pennsylvania six years ago with ceremonies and moments of silence.

Air Force Lt. Col Rick Francona, (ret.), an NBC military analyst, shared his thoughts with us yesterday on whether America and Wall Street are any safer since 9-11. "I think we are safer, but I definitely don't think we're safe," he said.

Francona, a Middle East expert, said however he believes al-Qaeda will more likely seek out targets like the military installations it attempted to attack in Germany. German police last week arrested suspected Islamic militants who were said to be planning massive attacks on U.S. military targets in Germany.

Those types of targets make sense and officials need to be especially vigilant overseas, he said. "That's the largest concentration of Americans outside the United States ... that's where they need to be looking," he said.

Thanks to CNBC's NYSE producer Robert Hum for the following contribution on stock market and sector performance since Sept 10, 2001.

Major U.S Indexes
Dow Industrials 36.67%
S&P 500 32.87%
Nasdaq Composite 50.95%
Dow Transports 75.39%
Dow Utilities 45.04%
Russell 2000 74.67%
S&P 500 Sectors Energy 144.94%
Materials 85.89%
Industrials 41.65%
Financials 31.46%
Cons. Discretionary 30.40%
Tech 29.98%
Cons. Staples 24.99%
Utilities 16.30%
Healthcare 4.81%
Telecom (6.11%)

Other Major Sector Indices
Healthcare 369.19%
Gold Stocks 279.06%
Oil Services 248.35%
Brokers 163.48%
Oil Stocks 149.51%
Natural Gas Stocks 139.57%
Retailers 65.48%
Biotech 58.09%
Banks 27.64%
Insurance 20.85%
Semis (2.61%)
Drugs (12.11%)
Airlines (62.08%)

Questions? Comments? marketinsider@cnbc.com

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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