Fed to take action today

Climbing the Wall of Worry
European shares gained about 1 percent in morning trade today, reversing early losses after euro zone manufacturing and services activity deteriorated by less than forecast. The Fed interest rate is the key event to be watched today. Also, Goldman Sachs is expected to report its first loss today.

Asian markets were mixed last night. China's factory output growth slowed to just 5.4 percent from a year earlier, well off the 8.2 percent pace in October and lower than economists' forecasts, setting the weakest pace for a non-holiday month on record and raising expectations for more stimulus measures for the world's fourth-largest economy. It was the worst reading since the start of 1999, the earliest date for which monthly data is available, excluding distortions caused by the timing of the Lunar New Year holiday, which falls in January some years but in February in others. Five percent GDP growth in the first half next year is no longer a risk, it is now a reality. That is less than half the growth rate China had achieved.

U.S. stock-index futures advanced as speculation the Federal Reserve may cut its main interest rate to a record low outweighed concern about a slowing economy.

Bernanke may today reduce the FED's main interest rate to the lowest level on record and prepare for one of the boldest experiments in its 94-year history: using its balance sheet as the key tool for monetary policy. Treasury yields dropped to near record lows on speculation the Fed will buy debt treasuries and will cut interest rates today.

The stock market was down yesterday on very low volume as investors wait for the Fed to take action today. In the past the market tended to go down regardless of the Fed announcement. But as we climb the wall of worry of this rally we could begin to see strong upside reactions to government efforts to stimulate the economy.