THE FEDERAL Reserve could be key for Wall Street this week as investors get to hear from the US central bank for the first time since a series of moves by its global peers, including the European Central Bank’s massive stimulus plan.
Last Thursday’s larger-than-expected stimulus package from the ECB lifted US stocks, helping indexes post gains for the week after three straight weeks of losses.
But the increased stimulus measures from the ECB and elsewhere globally, including the Bank of Canada, may make it tougher for the Fed – which has a rate setting meeting tomorrow and Wednesday – to move ahead with its own plan to start raising interest rates by mid-year, in case US economic policy moves out of sync with the rest of the world.
Should the United States raise rates when other major developed economies are being more expansive, that could boost the dollar, putting further pressure on commodity prices and adding to the threat of deflation.
This week also marks one of the busiest weeks for fourth-quarter US earnings, with 141 S&P 500 companies slated to report. Among them are several top technology names including Apple and Microsoft.
With fourth-quarter earnings projected to grow 10.6 per cent, tech is expected to be a bright spot in an earnings season that has been lacklustre so far. Profit growth expectations for S&P 500 companies, now at 3.3 per cent, are down sharply since the start of the fourth quarter following a big drop in forecasts for energy company earnings.