Investors watch out for key US events Tuesday

Investors around the world will be watching out for some key events that will unfold over Tuesday and Wednesday in the world's largest economy the US.
A key question haunting the mind of investors is: what kind of third quarter earnings will the world's largest investment bank Goldman Sachs report Tuesday followed by the world's second largest investment bank Morgan Stanley reporting Wednesday.
After the fourth largest investment bank Lehman Bros filed for Chapter 11 bankruptcy Monday and the third largest investment bank Merrill Lynch agreed to be bought over by Bank of America, many are wondering if the independent securities firm model is on its last legs.
Just six months back another such firm Bear Sterns had gone under and was bought out by JPMorgan-Chase.
"These two may be all right now but who knows two months down the line what they will report," said Naresh Pachisia, managing director of eastern India's largest distributor of financial products, the Kolkata-based SKP Securities Ltd.
Even Lehman Bros and Merrill Lynch had sent out comforting letters to its customers days before reporting huge and unbearable losses, he said.So far, the two firms have been relatively unscathed by the credit crisis, compared with their virtually defunct brethren, and analysts expect Goldman to record a profit of $1.73 a share, or about $680.0 million. Shares of the firm slumped $16.57, or 10.8 percent, to $137.64 Monday. Morgan Stanley was off $5.04, or 13.5 percent, to $32.19.
The second key event will be the meeting of the US central bank the Federal Reserve's policy makers Tuesday. The are expected to announce a 25 to 50 basis points cut in the short-term interest rate."Given the current situation, they have no choice but to inject liquidity in the system," said Jagannadham Thunuguntla, the equity head of a Delhi-based securities firm Nexgen Capitals Ltd.A break in oil prices has given the central bank some breathing room. Crude slumped $5.47, to settle at $95.71, Monday, its first close below $100.00 since March 4, and its lowest finish since February 15. The drop in oil and other commodities have eased worries of runaway inflation, and investors will be looking out for Consumer Price Index data to be released Tuesday by the US Labour Department.
The third event to watch out for is whether American International Group (AIG) manages to raise needed capital in an effort to avoid what could be a crippling downgrade to its credit ratings. New York's insurance regulator and Governor David Paterson has given approval to AIG to borrow up to $20.0 billion from its subsidiaries in order to sustain operations, but that is less than half of the $40.0 billion to $50.0 billion that it seems to need.
According to TradeTheNews.com, the Fed is unlikely to provide a bridge loan AIG asked for, and the government has asked Goldman and JPMorgan Chase to provide a lending facility to the insurer to the tune of $75.0 billion. Shares of AIG shed more than half their value Monday, losing $7.38, or 60.8 percent, to $4.76.
Finally, investors will be looking out for the ailing US housing market, which has been a huge factor in the collapse of firms like Lehman.The US home builders lobby, the National Association of Home Builders is due to report its monthly housing index Tuesday afternoon.
Thus, investors around the world will have their radars firmly fixed on the US over Tuesday and Wednesday.