Interest rate worries have been unhinging some stock investors and that puts the Fed's two day meeting front and center this week. There is a heavy load of other economic news in several data-packed days. Looming large are the first look at fourth quarter GDP Wednesday morning and jobs data Friday.
The thunder of fourth quarter earnings reports will continue to rule the tape ... or your website ... or TV screen for a third big week. As the markets have shown us, the tone of corporate earnings commentary will help set the tone for stocks.
President Bush comes to Wall Street Wednesday to speak on the state of the economy. And Microsoft finally gets its new Vista operating system into stores by Tuesday morning.
Anybody left on Wall Street who thought the Fed would be cutting rates early in the year has now moved on, or at least that's what the stock market seems to be saying. And the bond market is sending the same message as rates creep up on the growing string of data that every week seems to be a bit stronger than the street expected.
What a week it was in the stock market. No longer cowered by earnings fears, stocks were roaring by Wednesday, and the Dow delivered its 26th record since early October. But that faded pretty quickly and the stock market found a new phobia. On Thursday, the Dow (and the stock market) flipped over on worries about rising interest rates as the bond market reacted to housing data. That was also the day Ford disclosed its whopping $12.7 billion loss for the year. The Dow had its biggest loss in two months, and the sell off left the Dow down 0.6% on the week. The Nasdaq and S&P are down about the same for the week.
OIL BARRELS ALONG
Oil prices found some legs this week as cold weather had traders actually wearing coats to work at the NYMEX in New York. Other factors helped prices firm, including trouble at oil sites in Nigeria. Oil finished higher three of the last four sessions and ended up 2.2 percent for the week, but still down 9.2 percent for the month. Market moving inventory data will be released at its usual time Wednesday morning at 10:30 a.m. ET.
FED VS DATA
The Federal Reserve's announcement comes at about 2:15 p.m. ET Wednesday, while our Erin Burnett hosts Street Signs. The Fed is not expected to change rates but it could make some comments about the economy traders will watch.
What really matters this week is probably not the Fed. "The big focus in my opinion is not the Fed meeting. I think the big focus is our first look at GDP," says our Rick Santelli. This coming week "the traders are really going to pay a whole lot more attention to GDP and the employment data."
Investors should watch creeping rates in the bond market, says Santelli. "The psychological impact of 5 percent on the wings of the curve are something to pay attention to. It's a big psychological level in the cash market. The two-year and 30-year came close to it," he said. The yield on the 10-year ended the week at 4.879, its highest level since the middle of August, and the 2-year finished at 4.981, a hair under 5 percent.
"TRADER'S DREAM, ECONOMIST'S NIGHTMARE" says our Steve Liesman of the huge batch of data in the week ahead. Liesman says economists have been ratcheting up fourth quarter gross domestic product growth rates to estimates of up to 3.5 percent. (estimates range from 2.2 to 3.5 percent.)
"You had three rate cuts baked in, and you've now taken two out since December 4," Liesman says. Never without a chart, Liesman pulled up a screen and pointed at a series of data points when asked what he meant. He pointed to dates when data was reported that all supported the theory that the economy is stronger than economists had expected, something he's been saying since December. "First jobs, then trade came in and that really changed the fourth quarter outlook."
"I think the markets will be prepared for a (GDP) number that is three (percent) or better. They've gone through an attitude adjustment," he said. You could guess that some of that attitude adjustment came when those red numbers were crawling across the "TV tape" Thursday and Friday.
BIG DOSE OF DATA
On Wednesday, the markets will get ADP's employment report preview. Real GDP for the fourth quarter is reported at 8:30 a.m. ET, as well as the employment cost index. Construction spending and the Chicago Purchasing managers reports are at 10 a.m. ET.
On Thursday, there are initial jobless claims, personal income for December, ISM manufacturing for January and pending home sales for December.
Thursday will also bring an important look at January chain store sales. Our Margaret Brennan will be covering the reports, and we hope to see what happened to all those holiday season gift cards. Auto sales for January will also be reported all day Thursday. Our Phil LeBeau will steer us through the numbers.
On Friday, the big number of the week is the employment report for January at 08:30 a.m. ET. Later that morning, there are December factory orders and University of Michigan consumer sentiment.
A batch of big names are set to report and we'll see the first numbers from big oil. When asked what earnings are saying about the economy, our Joe Kernen said: "I think it's really telling us there's going to be no rate cut at this point." He warns though that energy could be a soft spot this earnings season.
Monday starts with reports from Verizon, Schering-Plough and Phelps Dodge to name a few. Tuesday brings Dow components Procter and Gamble, 3M, and Merck. GM was due but to report that day but postponed its report for its earnings restatement.
Countrywide Financial reports Tuesday. That should be of interest following activity in the stock Friday, starting with a Financial Times report that Countrywide was in talks towards an alliance or merger with Bank of America. Our Dylan Ratigan later reported that Bank of America was not the only bidder Countrywide was flirting with and that it has been entertaining possible partners or bidders for several months. Read his story, Countrywide Financial Entertaining Possible Bidders - Sources.
Eastman Kodak, Altria and Boeing, also Dow components report Wednesday. CNBC.com reporter Christina Cheddar Berk reports that Altria will announce its long awaited plan to spin off its stake in Kraft Foods that day. Read her story about the Kraft spin-off on CNBC.com, where she reports the plan could be challenged by a smokers attorney.
Time Warner also reports Wednesday and Google and Starbucks report after the bell. On Thursday, we will get Amazon earnings and some big oil names, Dow component Exxon Mobil, Valero, and Marathon. Chevron is due on Friday.