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 The S&P 500 <.SPX> has already fallen as much as 9 percent this
year, with stocks battered by concerns over China's slowing economy,
plunging oil prices and Fed Vice Chairman Stanley Fischer's comments
that he expected about four rate hikes this year.
But investors expect the Fed may soften its tone on interest rates
when it concludes a two-day meeting on Wednesday, especially after
European Central Bank President Mario Draghi on Thursday raised the
prospect of policy easing in March.
"The speculation is the message will continue to be dovish from the
Federal Reserve and the four rate increases they have been talking
about is not realistic, so that is being viewed as a positive" for
stocks said Ken Polcari, Director of the NYSE floor division at
O’Neil Securities in New York.
Investors will also deal with a flood of corporate earnings reports,
with results from big names in a range of sectors that will point to
whether the outlook for fourth-quarter earnings was overly
pessimistic.
Among the Dow components expected to report are Boeing <BA.N>,
McDonald's <MCD.N>, 3M Co <MMM.N> and United Technologies <UTX.N>.
Investors will watch these large multinationals for indications of
how the strong U.S. dollar is affecting exports and profit margins.
Also due to report is tech bellwether Apple Inc <AAPL.O>, the
biggest U.S. company and the one most widely held by individual
investors. It will be closely watched for signs of a decline in
iPhone sales after soft sales forecasts from some of its suppliers,
which could seal a third straight month of declines for the stock,
which has an outsized effect on the broader market.
"We are going to be provided the clearest picture of not just
backward looking fourth-quarter earnings, but much, much, much more
importantly, guidance," said Peter Kenny, equity market strategist
at Kenny & Co LLC, in Denver.
"Guidance is going to be significantly more important in terms of
that overall conversation of whether the US economy weathering the
global storm."
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Names such as Halliburton <HAL.N> and Hess Corp <HES.N> will provide
some of the first clues of the damage done to earnings in the energy
sector. Thomson Reuters data shows earnings are expected to decline
a massive 73.3 percent for the group.
Along with energy, declining forecasts for the materials, finance
and technology sectors have pushed any expected return to growth in
earnings for the S&P 500 off until the second quarter.
"When you start to look at some of the forecasts for earnings growth
in 2016, you're not expected to see much in the first quarter or
second," said Robert Pavlik, chief market strategist at Boston
Private Wealth in New York.
While big profit gains are expected in the latter half of the year,
that will depend on consumers increasing their spending and the
dollar stabilizing, Pavlik said.
Capping off the week will be the advance reading on fourth quarter
gross domestic product. But with expectations for a modest 0.8
percent growth rate confirming views the economy slowed in the
fourth quarter, investors are unlikely to be shocked by anything
near the estimate.
(Additional reporting by Caroline Valetkevitch; editing by Linda
Stern and David Gregorio)
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