All Eyes Turn to the Fed After a Volatile April
When the Federal Reserve’s Open Market Committee meets this week, Wall Street will be anxiously waiting for what has become a key word in the central bank’s monetary policy: “measured.” And if the Fed says it is abandoning its strategy of measured interest rate increases, then hang on for a bumpy ride.
The Fed is widely expected to raise the nation’s benchmark rate by a quarter of a percentage point to 3% after its meeting Tuesday, but as usual, investors will be parsing the accompanying policy statement for signs of change -- good or bad.
On the good side, the Fed could signal that inflation remains in check and that the economy continues to grow. That -- along with a promise of measured, quarter-point rate increases in the future -- would likely give the stock market a much-needed boost.
If, on the other hand, the Fed signals that inflation is becoming more of an issue, that the economy is slowing or that policymakers are forgoing their measured approach, then it is possible that the market would break below its current levels -- which could point to a Dow Jones industrial average below 10,000.
“It’s so bizarre right now. The economic numbers day to day are volatile, and the market is following right along,” said Sandy Lincoln, chief market strategist at Wayne Hummer Asset Management. “It would be nice to get some reassurance from the Fed.”
Wall Street could use some reassurance after a volatile, ugly April. Despite strong corporate earnings and a drop in crude oil futures, worries about inflation and the economy resulted in five 100-point daily drops on the Dow and a pervasive unease that sent major stock indexes down 2% to 4% for the month.
From Associated Press
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This Week’s Datebook
Today
* Institute for Supply Management releases its manufacturing index.
* Commerce Department reports construction spending for March.
* Quarterly earnings released by DirecTV Group, Avon Products, Tyson Foods and Electronic Data Systems .
Tuesday
* Automakers will report U.S. new-vehicle sales for April.
* Commerce Department reports March factory orders.
* Quarterly earnings released by Safeway, Tyco International, MetLife, Qwest Communications International and Marsh & McLennan.
Wednesday
* The Institute for Supply Management issues its index on the service sector.
* Quarterly earnings released by Time Warner and Univision.
Thursday
* Labor Department reports on first-quarter worker productivity.
* Quarterly earnings released by Blockbuster and Pixar Animation Studios.
Friday
* Labor Department issues its April employment report.
