United Parcel Services' after the bell earnings warning and the continued meltdown in financial stocks are casting a negative tone on the market ahead of Tuesday's open. But stocks are also somewhat stuck in a holding pattern ahead of Wednesday's Fed news.
Oil, too, has kept the pressure on stocks, continuing its unrelenting move higher, even after Saudi Arabia promised over the weekend to turn on the spigot. Disruptions in Nigeria lifted crude $1.38 per barrel to $137.85.
UPS followed rival FedEx and reduced its profit forecast for the second quarter. Its stock fell after it cut its outlook, saying that the unprecedented increase in fuel costs and the slow economy hurt profits. UPS said it is seeing lower than expected package volume and an accelerating decline in the use of premium air products. It also said it is now seeing the "anemic" U.S. economy negatively impacting package volumes coming into the U.S.
Art Hogan, managing director at Jefferies, says we'll see more earnings negatives related to oil. "I think anybody that uses any sort of energy in any significant way" will show an impact, he told me. "FedEx is the tip of the iceberg," he said (ironically, he made that comment less than an hour before the UPS news)
Two key stock indexes barely budged Monday, with the Dow down 0.33 points at 11,842 and the S&P up 0.07 at 1318. But the Nasdaq was down 20 at 2385, and the S&P financial sector was down 2.7 percent, continuing last week's decline on concerns about more losses and writedowns.
The dollar gained close to 0.7 percent against the euro, and Treasurys sold off, lifting yields. The 10-year was yielding 4.168 percent. Gold moved lower as the dollar rose, losing $16.50 per troy ounce or 1.8 percent to $884.80.
Fed on Hold
The Federal Open Market Committee starts its two-day meeting Tuesday. It is not expected to move on rates, but it is expected to talk tough on inflation and there's some speculation it will indicate a clear inclination toward raising rates when it issues a statement Wednesday afternoon.
Earlier this month, Fed Chairman Ben Bernanke indicated the Fed is unhappy about the weakness of the dollar and said it's monitoring the situation.
"We're in a wait and see mode for something that's very predictable. It's difficult to trade this market and get excited about it," said Hogan of Wednesday's Fed statement.
Also expected Tuesday is the S&P Case Shiller Home price index, released at 9 a.m. Consumer confidence is reported at 10 a.m.
"In terms of economic data ... it's going to be really hard to move the needle unless it speaks to inflation," said Hogan. He said he is watching the Thursday's first quarter GDP report for that reason, as it includes a price component. He is also watching Friday's personal income and spending data for the same reason.
There is some earnings news expected Tuesday with reports due from Kroger ahead of the opening, and Darden Restaurants and Jabil Circuits after the bell.