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Street hunting for global growth clues

The state of the global economy will take the spotlight Tuesday with scattered manufacturing reports and earnings from Nike expected.

"I think if you get a stable read on global manufacturing this week, that will really calm fears of a global recession," said John Canally, chief economic strategist at LPL Financial.

Overnight and into Tuesday morning, Markit is set to release initial March reads on manufacturing PMI for Japan and the United States, and the composite PMI — including both services and manufacturing data — for France, Germany and the overall euro zone. The Markit flash U.S. services PMI is scheduled for release on Thursday.

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Traders work on the floor of the New York Stock Exchange.
Lucas Jackson | Reuters
Traders work on the floor of the New York Stock Exchange.

Peter Boockvar, chief market analyst at The Lindsey Group, said the Markit reports will be a "good preview" of the ISM data, which has a longer track record.

"That will be important because we know in manufacturing we've been in contraction for a while, and in services (data) has been softening as well," he said.

The Markit U.S. manufacturing PMI edged lower in February to 51.3, while Japan's manufacturing PMI last month was even closer to the contraction-expansion line at 50.1.

David Kelly, chief global strategist at JPMorgan Funds, said improvement in recent data should support a tick higher in the flash March PMI figures and contribute to further gains in stocks.

U.S. stocks drifted higher Monday, with the Dow Jones industrial average closing up 21.57 points at 17,623.87 and the S&P 500 up 2.02 points at 2,051.60. Both indexes are in positive territory year-to-date and within 4 percent of their 52-week intraday high.

As of the close, trade volume was on track for the lowest of the year so far.

Telecommunications and health care led advancers in the S&P. Energy and materials led decliners, despite U.S. crude oil futures for April delivery rising 47 cents, or 1.19 percent, to $39.91 a barrel. After the settle, the contract rolled to May, which ended up 38 cents, at $41.52 a barrel.

Treasury yields rose on Monday, with the 2-year yield near 0.87 percent and the 10-year yield around 1.92 percent in late trade.

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Both San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart said in separate news reports that a rate hike could come as early as next month. Neither are members of the Federal Open Market Committee.

"They're non-voting so the market takes (it with) a grain of salt, but maybe this is the beginning of an attempt to set up the market for an April or June rate hike. The data set them up for a March hike. The communication did not," Boockvar said.

Two alternate members of the FOMC are on the calendar for Tuesday.

Chicago Fed President Charles Evans is scheduled to speak in the afternoon on economic conditions and monetary policy, while Philadelphia Fed President Patrick Harker is due to speak in the evening on growth and the role of economic policies.

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Last week, the Federal Reserve lowered its projections for the number of rate hikes in 2016 to two from four and said "global economic and financial developments continue to pose risks."

"I think what's interesting was last week really revealed the extent to which the Fed seems to be pursuing a monetary policy that is divorced from domestic considerations," Kelly said. "I think a lot of what they are doing is aimed at keeping the dollar low."

The U.S. dollar index edged higher Monday after falling sharply last week on the Fed's accommodative policy decision. The dollar index is still more than 3 percent lower for the quarter.

Dollar strength and the drop in oil prices have weighed on corporate earnings. With stabilization in the currency and oil, analysts are watching quarterly reports for signs that those headwinds have abated.

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Nike is scheduled to report fiscal third-quarter earnings after the close Tuesday.

"It's going to be a good read on the consumer really for the months of February and December and January," said Nick Raich, CEO of The Earnings Scout.

"The interesting take from Nike is not just what it's doing domestically but what it's doing internationally," he said.

North America accounted for about 48.5 percent of total Nike Brand revenue in the quarter ended Nov. 30, 2015.

Red Hat, Five Below and Krispy Kreme are also scheduled to release earnings after the close.

Other data due for release Tuesday morning include the January Federal Housing Finance Agency's Home Price Index and the March Richmond Fed survey.