By Sruthi Shankar
(Reuters) – The S&P and the Dow were set to open at record highs on Monday as appetite for riskier assets improved on easing tensions on the Korean peninsula and ahead of the Federal Reserve’s meeting that could unveil plans to trim its bloated balance sheet.
A relatively quiet North Korea and U.S. Secretary of State Rex Tillerson’s comments on “peaceful solution” over the weekend have calmed investors.
However, the tensions could be back in focus with U.S. President Donald Trump set to address world leaders at the United Nations on Tuesday.
The Federal Open Market Committee’s two-day meeting starting on Tuesday is unlikely to result in an interest rate increase, but investors will focus on how Fed Chair Janet Yellen views recent inflation readings for clues on the timing of further rate hikes.
The central bank is also expected to announce plans to begin unwinding its $4.2 trillion portfolio of Treasuries and mortgage-backed securities, nearly a decade after the global financial crisis.
“Traders are coming in optimistically given no new geopolitical issues concerning North Korea. They are looking forward to the Fed meeting,” said Andre Bakhos, managing director of Janlyn Capital in Bernardsville, New Jersey.
Persistently weak readings of inflation that have remained below the Fed’s 2 percent target rate have been a concern for policymakers.
However, a stronger-than-expected rise in consumer prices in August triggered a more than 50 percent rise in the odds of a December rate hike, according to CME Group’s FedWatch tool.
At 8:30 a.m. ET (1230 GMT), S&P 500 e-minis <ESc2> were up 4 points, or 0.16 percent, with 103 contracts changing hands.
Nasdaq 100 e-minis <NQc2> were up 3.5 points, or 0.06 percent, in volume of 23 contracts.
Dow e-minis <1YMc2> were up 60 points, or 0.27 percent, with 15 contracts changing hands.
On Friday, the benchmark S&P 500 index closed at a record high, hitting the 2,500 level for the first time, largely helped by a rebound in technology stocks.
The S&P’s record came less than four months after it closed above 2,400 and brought 2017’s gain to nearly 12 percent.
“Investors are looking at equities as the best game in town for returns,” Bakhos said.
Economic data in the day includes a report on NAHB Housing Market Index at 10 a.m. ET. The index, a measure seen as a proxy on domestic housing starts, is expected to edge down to 67 for September, from 68 in August.
In merger news, Orbital ATK <OA.N> jumped 20 percent in premarket trading after Northrop Grumman <NOC.N> said it would buy the missile and rocket maker for about $7.8 billion in cash. Northrop’s shares rose 1.64 percent.
Shares of Nabriva Therapeutics <NBRV.O> more than doubled after the company said its drug to treat community-acquired bacterial pneumonia met the main goal of a late-stage study.
Caterpillar <CAT.N> was up 1.6 percent, following an upgrade from UBS to “buy” from “neutral”.
