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 Minutes of the Fed's March meeting will be released on Wednesday,
giving investors a chance to comb through the summary for tips on
when rate increases will hit.
If traders believe that less vocal policymakers will support Fed
Chair Janet Yellen's expressed go-slow approach to raising interest
rates, they may bid up stocks further.
Most Wall Street Fed watchers expect an interest rate hike in June.
Yellen has indicated she would not want to raise rates unless data,
such as increasing inflation, proved such a move timely.
"If it comes out more dovish, you've got to suspect that the equity
markets would really like it," said Jeff Weniger, senior strategist
at BMO Private Bank. Should the minutes show real caution by other
Fed policymakers, energy, gold, emerging markets and materials could
benefit the most, Weniger said.
Equity markets could suffer if the Fed shows a more aggressive
stance. Shares of banks and other financial companies, which have
been damaged by low interest rates, could be the lone sector to win.
Investors may trade on even the subtlest of information next week as
there is a paucity of big market-moving events. This week, Fed talk
and the employment report helped markets rise; later in April, the
start of the first-quarter corporate earnings reporting season
likely will drive share prices.
The seven-week U.S. stock market rally could still have room to run
and beat a record high set by the S&P 500 last May, in part because
the Fed has walked back from an expectation of four interest rate
hikes this year to two.
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The S&P 500 would need to rise less than 3 percent to take out its
record closing high.
Stock reacted positively to Chair Janet Yellen's cautious tone at
the end of the Fed's mid-March meeting, with the benchmark S&P 500
moving into positive territory for the year.
A series of comments by other Fed members, however, sent the index
back into the red just days later. Stocks resumed an upward
trajectory when Yellen reiterated her intentions to "proceed
cautiously" this week.
Eric Wiegand, senior portfolio manager at U.S. Bank's Private Client
Reserve in New York, is one of the many who will be reading those
minutes closely.
"Getting any color will continue to be very important and so will
getting a sense of what type of dissent was present among voting
members," he said.
(Reporting by Laila Kearney; Editing by Nick Zieminski)
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