Week ahead: new transparency at the Fed and a gusher of earnings
The Fed will hold its first-ever quarterly briefing, and new data will likely reveal sluggish economic growth for the first quarter
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The Fed in the week ahead is expected to officially signal the long-anticipated shift away from one of its most controversial easy money policies, even as new data is likely to show the economy grew at a more sluggish pace in the first quarter.
The two-day Fed meeting will also be groundbreaking in that Fed Chairman Ben Bernanke holds a 2:15 p.m. ET press briefing Wednesday afternoon, following the 12:30 p.m. release of the Fed statement, in its first ever quarterly briefing.
"This is a big deal. I think it's pretty meaningful, and it will increase transparency and give the Fed, Bernanke in particular, more opportunity to explain the statement," said Ian Lyngen, senior Treasury strategist at CRT Capital.
The coming week also holds a significant amount of data, including Thursday's release of first quarter GDP, which is expected to show a temporary softening of the economy to a growth rate of 2 percent or less.
There will also be another gusher of corporate earnings reports, from about one third of the S&P 500 companies, including ExxonMobil, Coca-Cola, Caterpillar, Norfolk Southern and Amazon.com. So far, about 75 percent of the companies reporting have beat earnings estimates.
Investors are also watching the dollar in the week ahead, as it hovers at a three-year low. Oil and other commodities continue to move higher, as the dollar slides, and stock traders are concerned higher energy prices could start to crimp consumer spending and hurt corporate profits.
The markets though are mostly focused on the Fed, and the belief that it will confirm the end to its quantitative easing program, which has been expected to be completed in June. The program has been credited for driving the dollar lower and commodities and stocks higher, since Bernanke first suggested it last August.
Pimco senior market strategist Tony Crescenzi said Bernanke's goals for his briefing would be to reassure the markets that the Fed is focused on price stability, at a time when inflation is edging higher. "The second purpose would be to control or limit collateral damage from an eventual change in monetary policy. In other words, when the Fed decides to reverse course, it needs to explain what it's doing because the reversal will be more complex than normal," said Crescenzi.