Wall St Week Ahead Investors to watch Fed minutes, jobs
Scott Eells/Bloomberg via Getty Images
By Caroline Valetkevitch

NEW YORK -- Investors in U.S. stocks will look to Washington this week, awaiting key jobs data and minutes from the Federal Reserve's most recent meeting, when the central bank decided to cut its unprecedented monetary stimulus.

Minutes from the Dec. 17-18 meeting, after which the central bank announced its plan to reduce monthly asset purchases by $10 billion to $75 billion, could give further insight into the reasons behind the decision and offer clues about how quickly the Fed will wind down the stimulus. The minutes will be released Wednesday.

Stocks rallied following the Fed's decision because it confirmed to many that the U.S. economy was on firmer footing and ended uncertainty over when the central bank would finally reduce its stimulus, which was the driver of the S&P 500's gain of nearly 30 percent last year.

Recent data, including Thursday's factory activity report, confirmed underlying strength in the economy, suggesting the Fed was justified in its move.

But investors will be anxious to see whether that strength also is evident in the December U.S. nonfarm payrolls report, due Friday. The Fed has tied its policy in part to jobs data. In its December announcement,
the Fed said it "likely will be appropriate" to keep overnight rates near zero "well past the time" that the U.S. jobless rate falls below 6.5 percent.

"The expectation is, we're going to hear things are good. Otherwise, why would they have tapered?" said Rex Macey, chief investment officer of Wilmington Trust Investment Advisors, based in Wilmington, Del.

U.S. employers are expected to have added 197,000 jobs in December, down slightly from the 203,000 jobs added in November, according to economists polled by Reuters. The U.S. unemployment rate is expected to remain at a five-year low of 7 percent.

The Fed's decision to trim its stimulus in December came as a surprise to many investors, who had expected the Fed to delay such a decision until early in 2014.

Signs of weakness in economic data could suggest that the Fed acted too soon and give investors reasons to sell, especially as last year's huge rally left investors braced for a period of consolidation.

Stocks ended last week with modest losses, with the Dow Jones industrial average (^DJI) off less than 0.1 percent and the Standard & Poor's 500 index (^GPSC) down 0.6 percent. The Nasdaq composite (^IXIC) also fell 0.6 percent for the week.

Besides the payrolls data Friday, this week brings the Institute for Supply Management's December report on the U.S. services sector Monday as well as November factory orders and a revised report on November durable goods orders.

The week's economic calendar includes the international trade deficit data for November on Tuesday and payrolls processor ADP's report on U.S. private-sector employment in December on Wednesday. The ADP report is expected to show that private-sector employers added 200,000 jobs in December, down slightly from 215,000 in November, according to a Reuters poll.

"I think the equity markets borrowed a bit out of 2014 in terms of sniffing out better growth, and now if there is some concern that it may not be fulfilled, then that might be an impetus for investors to cool their enthusiasm," said Mark Luschini, chief investment strategist of Janney Montgomery Scott in Philadelphia, which manages about $60 billion in assets.

To be sure, Ben Bernanke, in his last speech Friday as Fed chairman, said the central bank is no less committed to highly accommodative policy now that it has trimmed its stimulus. In order to help the economy recover from its 2007-2009 recession, the Fed has held interest rates near zero since late 2008.

Bernanke is set to be succeeded by Fed Vice Chair Janet Yellen when he steps down at the end of this month. The U.S. Senate is scheduled to vote late Monday afternoon on Yellen's nomination as the Fed's next chair. She is expected to get approval, and as a result, she would become the first woman to chair the U.S. central bank.

Alcoa Results Due

Investors also will be keeping an eye on the first results from the upcoming earnings season for signs of how well they are holding up, compared with expectations. Results from Alcoa (AA) and Monsanto (MON) are both due this week.

The pace of companies reporting earnings isn't expected to pick up until the following week, when a number of banks are due to report, including JPMorgan Chase (JPM).

Fourth-quarter results are expected to have increased 7.6 percent from a year ago, according to Thomson Reuters data. That compares with earnings growth of 6 percent in the third quarter. Those results are likely to help determine whether earnings forecasts for 2014 need to come down and whether stock values have become overstretched.

"If you have earnings growth and the economy is better, then stocks can go up," said John Fox, director of research at Fenimore Asset Management in Cobleskill, N.Y.

Some focus may turn to retailers as companies report holiday same-store sales in the coming days, ahead of the consumer and retail ICR XChange conference Jan. 13-15.

Goldman Sachs analysts recommended buying options on the stocks of some companies, including Wendy's (WEN) and GameStop (GME), heading into the events.


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jimmy_branch

Just as the Unions wouldn't clean their own house and the companies had to do it for them; the American people need to clean the White House to rid both parties who are bought and paid for by Wall Street.

January 06 2014 at 11:28 AM Report abuse rate up rate down Reply
yourcommentshavebeenbanned

This article will soon be pulled down
due to all the negative posts about Obama and his Sheep Democrats.

January 06 2014 at 8:49 AM Report abuse +3 rate up rate down Reply
thetruthliveson4ever

Obama's favorite mentor wrote, "We will destroy America from the inside"..
And Obama 'updated' that quote to say, "Fundamentally Changing America"...
This 2014 November election - Vote Out All Democrats -

January 06 2014 at 8:39 AM Report abuse +5 rate up rate down Reply
1 reply to thetruthliveson4ever's comment
greatbirdusa

This is the "Hope & Change" that Obama promised....

January 06 2014 at 8:42 AM Report abuse +2 rate up rate down Reply
truthnocharge

Why doesn't Huff / AOL publish updates
on all the disasters caused by Obamacare.?
Is hiding all the Obama / Democrats from what they did to America
more important then the citizens of America.?
REMEMBER in NOVEMBER and Vote Out All Democrats...

January 06 2014 at 8:25 AM Report abuse +7 rate up rate down Reply
truthwillneverdie

... 2014 elections - REMEMBER and VOTE OUT - all those who supported Obamacare...
...Democrats - Out - Democrats Out - Democrats Out - Democrats Out - Democrats Out...
--- VOTE THEM OUT - VOTE THEM OUT - VOTE THEM OUT - VOTE THEM OUT ----

January 06 2014 at 8:08 AM Report abuse +7 rate up rate down Reply
jrb359

3 more long years of a stagnant economy!

January 06 2014 at 8:06 AM Report abuse +4 rate up rate down Reply
jdykbpl45

Thank you, Obama, for the lousy employment situation.

January 05 2014 at 4:53 PM Report abuse +8 rate up rate down Reply
1 reply to jdykbpl45's comment
jimmy_branch

Your welcome son and here's a little marijuana to take your mind off it , I just pickled it up from some illegals I let across the border today and they set up a nice pot stand next to an elementary school in town. They were able to transport the product with the drivers license I issued to them even though there not form this country and all the gay ) ones got a discount.

Later I'm gonna meet with Ben the Fed Clown and see if we can't print some spending money for them illegals. and since they don't really work I might just issue some unemployment to them since I didn't extend unemployment for the legal hard working citizens of this country who are out of work by no fault of their own.

Have a nice day!

January 06 2014 at 12:55 AM Report abuse +3 rate up rate down Reply