A decidedly negative tone has replaced Monday's complacency as the Fed starts its two-day meeting today. A Wall Street Journal article detailingwhy a rate cut isn't a sure thing has put traders on edge and cast doubt about the cut to the Fed funds rate that most of them think is a "sure thing."
Wall Street heads lower after a down day in Europe's stock markets. Asian markets were mixed.
The Wall Street Journal article was written by veteran Fed reporter Greg Ip, who will be a guest on CNBC's "Squawk on the Street" today. Ip said while the market believes a rate cut is a near certainty, the Fed is deciding between a quarter point reduction and no cut at all. The article is a balanced assessment of the Fed's decision making process, but the headline has some traders just plain spooked.
"Today's trade is focused on the Greg Ip article," says Andy Brenner of M.F. Global. "Ip is trying to reframe the Fed outlook from a 25 to 50 basis cut tomorrow to a no cut to 25 outlook. If Ip has some good insight from the Fed and is right, the market will be dramatically disappointed."