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Fed meets amid market skittishness

Janet Yellen takes center stage in the week ahead, chairing her first FOMC meeting amid market skittishness over events in Ukraine.

There is little doubt the Fed will continue to move forward and announce another $10 billion "taper" of its bond-buying program, taking it to $55 billion a month.

The Fed is widely expected to take a knife to some of the language in its statement that set an unemployment rate of 6.5 percent as a level to cut rates.

(Read more: Markets hang in the balance ahead of Fed decision)

"This is all about her. It's her first meeting. It just doesn't seem like the meeting where there's going to be a lot of policy fireworks given it might be prudent to let things coast through again, while they all get on the same page," said George Goncalves, Treasury strategist at Nomura Americas.

The Fed's target of 6.5 percent for unemployment is seen by the markets as outdated and confusing, since unemployment is now at 6.7 percent. Fed officials have also called it obsolete. The Fed will also release new economic forecasts, and any talk about the economy is likely to suggest that the weather may be a major factor behind recent weak data.

(Read more: Why this is the one number to watch in week ahead)

Goncalves does not expect the Fed to make moves based on Ukraine, unless markets deteriorate rapidly. "The Fed's in a tough predicament because they can't seem like they're reaciting. They demonstrated once before when we had the fallout in January, they were unwaivering. They did the taper," he said.

While stocks sold off in the past week, buyers sought safety in bonds, sending the 10-year yield to 2.65 percent. The Dow was down 2.4 percent to 16,065 and the S&P was off nearly 2 percent to 1,841, in the worst weekly performance since January.

(Read more: Battered market limps to end of ugly week)

The Fed's success at altering its forward guidance will ultimately show up in the yield curve, Goncalves said. "The flattening of the curve could be the risk next week. 10s (10-year notes) and 30s (30-year bonds) maybe can go up a little bit in rates, but fives (5-year notes) can go up more if they don't seem like they made more progress on the forward guidance," he said.

Traders work the floor of the New York Stock Exchange after the opening bell on March 14, 2014 in New York City.
Getty Images
Traders work the floor of the New York Stock Exchange after the opening bell on March 14, 2014 in New York City.

The two-day Fed meeting ends Wednesday with a presser by Yellen, also her first.

Markets are expected to remain on edge going into the coming week, after Sunday's referendum in Crimea on whether to join Russia or stay with Ukraine. Tense talks between the U.S. and Russia ended Friday with no clear resolution on whether Russia would recognize the vote and the West would impose sanctions.

"I think anxieties are going to be running high. The Crimea vote is a foregone conclusion, but how does the West respond? How does Russia respond?" said Marc Chandler, chief Treasury strategist at Brown Brothers Harriman.

(Read more: Was that Russia transferring dollar holdings?)

On the data front, there is industrial production Monday, CPI on Tuesday, and home sales data and weekly jobless claims Thursday. There are a few earnings, including Nike on Thursday and Tiffany on Friday.

Monday

Earnings: JA Solar

8:30 a.m.: Empire State survey

9:00 a.m.: TIC data

9:15 a.m.: Industrial production

10:00 a.m.: NAHB survey

Tuesday

Earnings: Adobe Systems, Oracle, DSW, FactSet

FOMC meeting begins

8:30 a.m.: CPI

8:30 a.m.: Housing starts

Wednesday

Earnings: FedEx, Guess, HermanMiller, KB Home, General Mills

7:00 a.m.: Mortgage applications

8:30 a.m.: Current account

10:30 a.m.: EIA oil inventories

2:00 p.m.: FOMC statement and projections

2:30 p.m.: Fed Chair Janet Yellen press briefing

Thursday

Earnings: Nike, Scholastic, Lennar, Silver Wheaton

8:30 a.m.: Initial claims

10:00 a.m.: Existing homes

10:00 a.m.: Philadelphia Fed survey

10:00 a.m.: Leading indicators

10:30 a.m.: EIA natural gas

Friday

Earnings: Darden Restaurants, Tiffany

11:45 a.m.: St. Louis Fed President James Bullard

1:45 p.m.: Dallas Fed President Richard Fisher

4:30 p.m.: Minneapolis Fed President Narayana Kocherlakota

6:30 p.m.: Fed Gov. Jerome Stein

—By CNBC's Patti Domm. Follow her on Twitter @pattidomm.

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.