| NEW YORK
NEW YORK Feb 14 With economic data being
shoveled aside like snow and earnings season winding down, U.S.
stock investors could zero in next week on the Fed's view of the
economy and technical analysis charts as the S&P 500 nears its
Minutes of the Federal Reserve's most recent meeting of its
policy-setting committee will be published on Wednesday, the
second trading day of a holiday-shortened week in the United
States. The U.S. stock market will be closed on Monday for
Investor interest in the Jan. 28-29 meeting's minutes will
probably focus on discussions surrounding the Fed's forward
guidance. The U.S. central bank's threshold that the U.S.
unemployment rate must hit 6.5 percent before Fed policymakers
will consider an increase in interest rates seems stale now. The
jobless rate is just a notch higher at 6.6 percent.
The Fed doesn't expect to start raising rates until at least
late next year. So Wall Street will focus intently on the Fed's
maneuvering over how to adjust this guidance, which is
supportive of higher equity prices.
"We want to see any discussion on the language moving away
from the thresholds," said Quincy Krosby, market strategist at
Prudential Financial in Newark, New Jersey. "It's clear the
thresholds are boxing them in."
"The market wants to hear they are flexible regarding data
that perhaps continues to soften," she said. "Any sense of what
it would take for them to pause the tapering will be important."
Fed Chair Janet Yellen said in her first congressional
testimony earlier this week that "unseasonably cold temperatures
... may be affecting economic activity in the job market and
elsewhere," giving traders a reason to dismiss a recent soft
patch of economic data.
The Fed announced in December that it would begin to shrink
the amount it spends monthly on asset purchases in its stimulus
program to support the economy. The beginning of the end of the
stimulus shifted market focus to fundamentals and economic data.
Traditionally market-moving numbers next week include U.S.
housing starts on Wednesday and existing home sales on Friday,
as well as producer and consumer price inflation on Wednesday
and Thursday, respectively.
However if the recent pattern continues, any weakness in the
numbers will be disregarded, blamed on excessive cold weather,
and the market will move on.
"The market is getting used to the bad weather, factoring it
in," said John Canally, investment strategist and economist for
LPL Financial in Boston. "But the story is, it might get to
April, when we get the March data, that we have a return to what
the underlying strength of the economy looks like, and then that
might be overstated."
PULL OUT YOUR CHARTS
In the coming week, technical analysis could fill the vacuum
left by the uncertainty about how economic numbers reflect the
underlying strength of the U.S. economy.
The S&P 500 traded on Tuesday above its 50-day moving
average for the first time since Jan. 24. That level, now near
1,811, served as support on a first test shortly after the open
That curve is again trending higher. Next week, the S&P
500's trading range could tighten as it approaches the 1,850
area, near the intraday and closing record highs set in
"The 1,850 area is very important. It's safe to say there
will be a good amount of sell interest up there," said Frank
Cappelleri, equity sales trader and market technician at
Instinet in New York.
He added, however, that "you could make the argument that
there were a lot of people ready to sell near the 50-day moving
average a few days ago, and the market just blew past it."
The market's momentum is on the upside, coming off the best
two-week performance of the year. Unless stocks trade relatively
flat for the week, support or resistance will have to give.
For the week, the Dow Jones industrial average and
S&P 500 each rose 2.3 percent, and the Nasdaq Composite
climbed 2.9 percent. By Friday's close, the three major
U.S. stock indexes had scored their biggest weekly percentage
gains of 2014 - and their first back-to-back weekly gains this
"Positive momentum came back into the picture, and people
who missed the upturn put some money to work," Cappelleri said.
"Indicators that were depressed have turned around, neutralized
and are now back to overbought."
In the search for more catalysts to influence the stock
market's direction next week, traders will have a few earnings
to latch on to, with Coca-Cola Co and Wal-Mart Stores,
Inc as the headliners.
Coca-Cola, the world's largest soft drink company, will
report fourth-quarter earnings on Tuesday before the U.S. stock
Wal-Mart is expected to post fourth-quarter results on
Thursday, and more importantly, the world's largest retailer
will give its 2014 earnings forecast.
With 398 S&P 500 companies having reported results so far,
66.3 percent have beaten earnings expectations, above the
historical average of 63 percent. More than 64 percent have
topped revenue forecasts, above the long-term average of 61
percent, both according to Thomson Reuters data.
(Wall St Week Ahead runs every Friday. Questions or comments
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