When the Fed last met, it did not know about the failed Greek referendum or even the Chinese stock market meltdown, but traders nonetheless will be combing the minutes of that June meeting for any inkling of how it might react to those international developments.
Greece-related developments should continue to dominate market focus, but the minutes of that FOMC meeting Wednesday should get the market's attention when released at 2 p.m. ET. According to Bespoke, since 2013, the S&P 500 has traded lower eight of 10 times after the release of the minutes, but it also mostly rebounded the next day, reversing those losses.
"They can talk a little bit about keeping an eye on the international situation, but they can't rewrite history. They can't talk about the Greece referendum because it didn't happen yet," said John Briggs, head of strategy at RBS. "I look ahead to (Fed Chair Janet) Yellen's speech on Friday. You wonder how hawkish she could be. You don't want to kick the market when its down."
Markets, however, will hear from another Fed speaker Wednesday. San Francisco Fed President John Williams speaks at 2 p.m. on the outlook.
The markets were preoccupied last month by the potential timing of the Fed's first rate hike, but now have switched gears to worrying about China and Greece. As those events have became perceived as potentially more negative, traders added to bets in the futures market that the Fed would not hike rates until early next year. At this point, Briggs said RBS calculates the market is expecting the first full rate hike in January, and sees just a 22 percent chance of a rate increase in September.
The Fed minutes shouldn't change the perception of the market, but Yellen's talk on the economy at midday Friday might. Briggs said the Fed statement after that June meeting was neutral, and the minutes should be as well. "I think it's going to sound like a watch and wait Fed," he said.
Stock futures were lower Wednesday, after another nearly 6 percent rout in Chinese stocks overnight. European equities reversed earlier losses after Greece submitted new proposals seeking a debt deal.
Wall Street staged a big reversal Tuesday with equities closing higher, after a choppy day of trading on news related to Greece. The fact the euro group will meet Sunday and look at Greek debt sustainability gave the markets encouragement. "It was wild and woolly and some of it was technical," said Art Cashin, director of floor operations at the New York Stock Exchange for UBS.
Cashin said the reversal of a sharp intraday drop in oil also helped stocks, but developments on Greece became the bigger driver, including an unsubstantiated rumor that it was being given a 30-day reprieve. German Chancellor Angela Merkel said Greek Prime Minister Alexis Tsipras is expected to submit a loan request and reform proposals Wednesday, and the proposals will be reviewed to see if Greece can receive some short term funding.
Liz Ann Sonders, chief investment strategist at Charles Schwab, said stocks are caught in a volatile pattern while investors await the outcome for Greece and China.
"We may be within a 24-hour window of having a little more information on Greece. That would at least partly answer one of those questions and uncertainties," she said.
China could be the more difficult situation to read. The Shanghai stock market sold off again Tuesday, even after the government took steps to stop it. That spooked the oil market and commodities in general, as traders feared a bigger economic slowdown spreading out from the equities meltdown.
"Some of what they're doing is a little bit scary," said Sonders.
"They say they want to go to a more market based set of principles, especially around the stock market," she said.
"You get a 30 percent drop in the stock market and they step in, in command and control mode. They ban shorting and actually are exacerbating the problem…It just shows as reform minded as they like to be, when faced with a near term crisis, their default is to step in and micro manage."
Sonders said the situation in China could turn into a bullish story if it signals the leadership that they have to move more quickly on reforms. "This could be the pause that refreshes," she said. But it could also spread. "A continued plunge in Chinese stocks is a negative for the U.S. market," she said.
Sonders said Schwab is neutral on the market this year, expecting it to make much smaller gains than prior years. But she recommends investors keep a position in equities, both domestic and international.
The upcoming earnings season will be important, but the fact that the dollar has been driven higher by European events and oil has been slammed by China and Greece are negatives.
Alcoa reports earnings after the close Wednesday, one of the first major reports of the season. Pepsico follows on Thursday, and then a flood of reports are scheduled for next week.
"We're back in some of the same factors that caused a rumble in Q1 earnings," Sonders said. While it will not impact the earnings reports for the second quarter, company comments for the third quarter or beyond could be negative because of the oil plunge or strong dollar.
"So then the earnings recession story gets legs again," she said.
Stocks should trade in a volatile way but she does not see a panic from any of the catalysts. "Barring a more significant catalyst, other than this torture of news that we're getting out of both Greece and watching China scramble…I think it's more of the same in the market," she said.
As for oil, West Texas International crude futures closed down just 20 cents Tuesday at $52.33 per barrel, after falling to a key psychological level just above $50. "I think it could be a short covering rally," said John Kilduff of Again Capital. Oil fell nearly 8 percent Monday as traders watched for developments on China and Greece. Iran was also a catalyst, as negotiations on its nuclear program continue, even as it appeared the latest deadline of July 9 would not be met. An agreement would mean an end of sanctions that could eventually put up to one million barrels of Iranian oil onto an already oversupplied market.
Besides the Fed minutes, there is a 10-year auction at 1 p.m. and consumer credit for May is released at 3 p.m. Weekly mortgage applications are expected at 7 a.m.