By Sara Sjolin, MarketWatch

Dollar drops as traders wait for Federal Reserve call

U.S. stocks' steady rally looks likely to stall somewhat at the open Wednesday, with traders refraining from making any big bets as they wait to hear what the Federal Reserve's next move will be.

Stock futures flip-flopped flip-flopped between small gains and losses in the early going. Futures for the Dow Jones Industrial Average were up 4 points at 22,340, while those for the S&P 500 index rose 0.30 point at 2,505. Futures for the Nasdaq-100 index fell 2.25 points to 5,994.75.

The muted action comes after all three main benchmark posted small gains and ended at all-time highs on Tuesday (http://www.marketwatch.com/story/us-stocks-aim-for-fresh-records-as-fed-meeting-steals-focus-2017-09-19). The Dow average climbed 0.2%, while the S&P 500 and Nasdaq Composite Index both ended 0.1% higher.

"Financial markets are consolidating this morning, with all eyes on the Fed as the FOMC conclude their two-day meeting with the announcement of monetary policy," said Richard Perry, market analyst at Hantec Markets, said in a note.

"This could be a historic meeting today. Even though there is no expectation of a rate hike, the meeting could include the official announcement that the Fed will begin to reduce the size of its balance sheet," he added.

Read:Why stock market investors shouldn't sweat a shrinking Fed balance sheet (http://www.marketwatch.com/story/why-stock-market-investors-shouldnt-sweat-a-shrinking-fed-balance-sheet-2017-09-19)

Several central bank officials already wanted to start winding down the Fed's $4.5 trillion portfolio of government securities in July, but the majority wanted to hold until a later date. Traders now expect the Fed on Wednesday to reveal details on a balance-sheet reduction (http://www.marketwatch.com/story/feds-balance-sheet-unwind-will-be-moment-of-truth-for-financial-markets-2017-09-18) that will start in October.

The announcement is due at 2 p.m. Eastern Time, followed by a press conference with Chairwoman Janet Yellen at 2:30 p.m. Eastern.

"Any announcement that balance sheet normalization will begin shortly should have only a relatively muted impact on markets, given that the market largely expects it," said analysts at Rabobank in a note.

"We therefore believe that any dollar strength as a result of the announcement should be limited," they added.

The dollar traded lower against most other currencies ahead of the announcement. The ICE Dollar Index was down 0.2% at 91.654, falling for a second straight day.

In other economic news on Wednesday, a reading on existing home sales for August is due at 10 a.m. Eastern Time. See:MarketWatch's economic calendar (http://www.marketwatch.com/economy-politics/calendars/economic)

Stock movers: Shares of American Outdoor Brands Corp.(AOBC) climbed 1.9% in thin premarket trade, getting a boost from reports late Tuesday that President Donald Trump will ease rules on gun exports.

Bed Bath & Beyond Inc.(BBBY) slumped 14% ahead of the bell after the retailer late on Tuesday released earnings that widely missed forecasts (http://www.marketwatch.com/story/bed-bath-beyond-earnings-miss-widely-stock-halted-2017-09-19).

FedEx Corp.(FDX) could also move after the logistics company late Tuesday reported earnings below forecasts (http://www.marketwatch.com/story/fedex-shares-down-after-earnings-company-pins-miss-on-cyberattack-hurricane-harvey-2017-09-19), saying the quarter offered "significantly operational challenges" due to a cyberattack and Hurricane Harvey.

Other markets: Stocks in Europe were mostly higher, although the U.K.'s FTSE 100 index (http://www.marketwatch.com/story/ftse-100-edges-up-as-fed-decision-takes-center-stage-2017-09-20) underperformed due to a rise in the pound. Sterling strengthened after U.K. retail sales for August showed a bigger rise than expected (http://www.marketwatch.com/story/uk-retail-sales-rise-faster-than-expected-2017-09-20).

Asian stocks closed mixed (http://www.marketwatch.com/story/asian-markets-press-pause-ahead-of-fed-announcement-2017-09-19) as traders there remained cautious ahead of the Fed call.

Oil prices rose firmly, while metals gained across the board.

 

(END) Dow Jones Newswires

September 20, 2017 05:43 ET (09:43 GMT)

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