Wall St. Awaits Clues to Future Fed Actions
Investors will look closely at the Federal Reserve’s comments this week for clues on whether the central bank thinks the economy is losing steam or chugging along at a decent clip.
Wall Street expects the Fed to raise the federal funds rate another 0.25 percentage point to 3.25% in the week ahead. But investors will be looking for signs of whether this rate increase is the last, or next to last, for some time.
Recent gains in the market have been fueled by the hope that the Fed might put further interest rate rises temporarily on the back burner if the economy slows.
So any indication from the Fed’s rate-setting arm on the pace of future increases will be intensely scrutinized.
Some consumer data and end-of-the-month portfolio tweaking may help perk up the market.
But nervous investors will mostly be tuning in to a few key words from the Federal Open Market Committee meeting Wednesday and Thursday.
Investors will “really be paying attention to see whether or not the Fed is getting nervous about economic growth,” said Anthony Chan, managing director and senior economist at JPMorgan Asset Management.
The committee is expected to announce a rate increase, as well as issue its statement on monetary policy and the U.S. economy, Thursday as the meeting ends at about 2:15 p.m. Eastern time.
This would be the ninth straight rate increase since last June. Each time, the Fed has raised rates by a quarter of a percentage point.
In May, the Fed raised its target for the federal funds rate to 3% from 2.75%.
From Wall Street to Main Street, investors will note the Fed’s views on inflation and economic growth.
“They’re not trying to fight inflation. They’re trying to get the housing market to cool down,” said Elliot Spar, a market strategist with Ryan Beck & Co.
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The Week Ahead
Today
* Quarterly earnings report expected from Nike Inc.
Tuesday
* The Conference Board reports its consumer confidence index for June.
Wednesday
* The Commerce Department releases final figures for the first quarter’s gross domestic product growth.
* Quarterly earnings reports expected from Oracle Corp., 3Com Corp. and Research in Motion Ltd.
Thursday
* The Commerce Department reports on U.S. personal income for June.
* Quarterly earnings reports expected from Constellation Brands Inc. and PalmOne Inc.
Friday
* The Commerce Department reports on U.S. construction spending for May.
* Automakers release their monthly sales data for May.
* The University of Michigan reports its consumer sentiment index for June.
