How will the market react to Fed, earnings and jobs report?

Published Mon, Apr 28 20146:28 AM EDTUpdated Mon, Apr 28 20146:28 AM EDT

Patti Domm @in/patti-domm-9224884/@pattidomm

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What to watch next week: Fed, earnings & jobs

By the end of the coming week, it should be much more apparent whether a soft first quarter has really given way to an economic spring back.

Markets will navigate a Fed meeting, earnings from a quarter of the , and some significant economic data, most importantly – Friday's April jobs report.

But traders agree that tensions surrounding Ukraine will continue to dominate market focus, with the U.S. announcing new sanctions against Russia on Monday and German Chancellor Angela Merkel is headed to Washington on Thursday.

Meanwhile, the Fed is expected to proceed with another $10 billion tapering of its bond-buying program, but it is not expected to take other actions or even tweak its statement much.

The U.S. monthly jobs number will be the most important piece of new information on the data front, important in gauging the health of the economy and future Fed action.

First quarter GDP will be reported Wednesday for the first time, and the Fed will have a look at that report before it releases its 2 p.m. statement that day. J.P. Morgan chief economist Bruce Kasman expects first-quarter growth of 1.1 percent, but he expects an improvement to 3 percent in the current quarter. As for the Fed, he does not expect anything new.

"I think it's basically somewhat more confident that the economy is going to pick up off of this and there's certainly no real change in message on the policy front," Kasman said. "We had a slowing in the early part of the year. Payroll growth slowed down to 180,000. We think we're going to average a little over 200,000 this quarter. It's not a big move, but it's a move up."

Kasman expects 220,000 jobs were added in April, up from 192,000 in March, and an unemployment rate of 6.6 percent. "There will be interest in a wage dynamic, which should show a touch of firming," he said. The expectations are that average hourly earnings will rise 0.2 percent or 2.1 percent year-over-year.

Tony Crescenzi, senior portfolio manager and strategist at Pimco, said if the payrolls are much higher than expected or the wages rise more than expected, there could be a negative reaction in the bond market as traders speculate the Fed could move sooner to raise interest rates. "The Fed and Janet Yellen made it clear they'll be watching the wage figures very closely," he said. "A pickup in nominal wage growth would be consistent with employment conditions moving closer to normal. The vast majority of inflation can be explained by wage and labor costs. If the (jobs number) is as expected and wages were to be higher than anticipated that would elicit a negative reaction in the bond market. Yellen has made it clear the Fed will be watching that figure as a measure of slack."