×

Fed could trump data dump

A slew of data due out Tuesday could take a backseat as traders await the Wednesday conclusion of the Fed meeting.

"With the Fed so close to the data tomorrow, unless it's an outlier, the market's just going to (await) the Fed," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities.

The Federal Open Market Committee is scheduled to begin its two-day meeting Tuesday and release its statement and economic projections followed by a news conference on Wednesday afternoon. The Bank of Japan is due to conclude its meeting ahead of the U.S. market open on Tuesday, but is not expected to make any major changes to policy just more than a month after adopting negative rates.

Read MoreMorgan Stanley sees 30% risk of world recession

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.

A report on February U.S. retail sales is the key economic news scheduled for release Tuesday morning and the headline figure is expected to show a slight decline of 0.2 percent, according to analysts polled by Reuters.

"I think it coming in flat, that would be huge," said J.J. Kinahan, chief strategist at TD Ameritrade, noting he is watching the ex-autos figure.

The data will be closely watched for indications on consumer spending, which accounts for the majority of U.S. economic activity.

"People are still very neutral in terms of spending money," said Omar Aguilar, CIO of equities at Charles Schwab Investment Management.

"Capital expenditures by companies or consumer spending ... does not have a good outlook. That's a headwind for earnings growth and clearly will reduce the opportunity for economic growth," he said.

Other data due for release Tuesday include the February producer price index. The report will shed light on inflation, although analysts put more weight on the consumer price index (due Wednesday) and the Fed's preferred gauge, the core PCE deflator.

The March Empire State Manufacturing Survey, an index tracking manufacturing in New York state, is also due Tuesday morning and will be watched for signs of any improvement from February's negative 16.6 print.

January business inventories and the March NAHB housing market index are also scheduled for release.

Read MoreS&P 500 could rally, but risks still abound: Analysts

A better-than-expected retail sales report for January helped the S&P 500 rally more than 10 percent since the Feb. 11 "Dimon" bottom to stand just about 1.2 percent lower year to date.

Since that time all 10 sectors have risen 5 percent or more, with financials, materials and energy the top performers with gains of 13 percent or more.

The sharpness of the four-week rally took nearly 90 percent of the S&P 500 above their 50-day moving averages as of Friday's close, Bespoke said in a report. That marks the first read above 85 percent since November 2014, the note said.

"That's an encouraging sign to me because we're seeing improvement across all sectors. This has been a broad-based rally," Kinahan said.

Read MoreSmall stocks may be sending a big signal

The question remains whether that rally can continue.

"The market probably got too ahead of itself in assessing a bad situation (earlier this year)," said Jason Pride, director of investment strategy at Glenmede Trust. "There were some true fundamental underpinnings in the correction we saw. So any sort of complete rebound that gets to the point of missing the risks is probably incorrect. We think the market is probably being somewhat reasonable at this point. Now after rebounding it's probably where it should be."

U.S. stocks mostly shook off a sharp decline in oil prices Monday to close narrowly mixed in low volume trade — which as of the market close was tracking for the lowest volume day of the year so far. The S&P 500 fell 2.55 points to 2,019.64, still a touch above its 200-day moving average. The Dow Jones industrial average and Nasdaq composite came off session highs but clung to gains, with the Dow closing up 15.82 points at 17,229.13 and the Nasdaq up 1.81 points at 4,750.28.

U.S. crude oil futures settled down $1.32, or 3.43 percent, at $37.18 a barrel.

Read MoreTop value investor Pzena reveals best idea

"We would argue that given the environment we're in, slower growth, risks in energy, some risks in credit, inconsistent growth from emerging markets, another correction or another market blip sometime this year should be unexpected," Pride said.

Valeant Pharmaceuticals, Children's Place and Momo are scheduled to report earnings ahead of the opening bell Tuesday, while Oracle is due to post results after the close.

In political news, Florida, Illinois, Missouri, North Carolina and Ohio are scheduled to hold primaries on Tuesday.

"Probably the primaries will not change that much how we trade, but as we go into the fall, [there will be] more emphasis on the final result of the campaign," Schwab's Aguilar said.

Read MoreWall Street shouldn't bank on Fed hike