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Two big events coming — and one could rock the market

The Fed begins its two-day meeting Tuesday, but earnings from Apple after the closing bell may create a bigger trading event.

There are dozens of major earnings during Tuesday morning hours, with BP, Procter & Gamble, 3M and Eli Lilly among them. But Apple stands tall after the closing bell, following a series of high-profile tech misses and expectations for Apple's profits and revenues to decline. Twitter and AT&T also report after the close.

Apple is expected to report earnings fell to $1.99 from $2.33 per share, on revenues of $52 billion, down from $58 billion, according to Thomson Reuters. That would be the first quarter in 51 in which Apple's revenues would have actually shrunk.

Apple has lost some of its shine as a tech darling, but it still has big impact and is part of the Dow, S&P 500 and Nasdaq. In the past eight quarters, Apple rose 63 percent of the time on the day after earnings, for a gain of 1.25 percent, according to analytics firm Kensho. Its worst performance in those eight quarters was last quarter when Apple missed and iPhone sales disappointed. Its stock fell more than 6.5 percent.

Stocks were squishy Monday, as the S&P 500 lost three points to 2,087 as oil weakened. West Texas Intermediate crude futures were down 2.5 percent at $42.64 per barrel, as over-supply worries again bubbled up.

"I think there'll be a lot of eyes on Apple, and on earnings in general," said Steve Massocca of Wedbush Securities. S&P 500 companies' earnings are expected to decline by 7.3 percent in the first quarter, though more than 70 percent of companies reporting so far have beaten estimates, according to Thomson Reuters. Massocca says he does not believe that earnings have bottomed, a view shared by many analysts.

"I think [the stock market] is due for a little pullback, quite frankly. I think it's a little overbought," he said of the stock market. "The S&P at 17 times [earnings] is not cheap. I think the current monetary regime is a stock market flotation device."

As for the Fed, strategists expect no rate action and little tweaking to its statement when it is released Wednesday afternoon. "I think they'd telegraph something if they were going to say something," said Massocca. "If you look just at the U.S. economy, it makes sense to raise rates, but if you take all the international machinations including currency relations into account, it makes it more difficult to raise rates. The yen and euro I think would react dramatically to a significant change in U.S. interest rate policy at this point."

Some strategists expect the Bank of Japan meeting Thursday to be more market moving than the Fed, since there is a wide range of expectations for the BOJ, including more quantitative easing and more negative yields. The yen moved higher against the dollar on speculation ahead of that meeting, and dollar/yen was at 111.23 late Monday.

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John Briggs, head of strategy at RBS, said he expects no action from the Fed this week, but traders in the bond market have been positioning for higher yields. The 10-year rose to 1.9 percent Monday, while the two-year yield rose to 0.83 percent.

"If you've been long and you're heading into the Fed, and you don't think they're going to do anything, would you rather have the opportunity of losing a five-basis-point rally or being shocked and losing 10 to 15 basis points?" he said.

There are some expectations that the Fed could look at moving in June because of the steadier risk markets and better data.

"I still think it's too early for them to set up a June hike," said Briggs. "There's no upside for them to do that."

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Jeff Mortimer, director of investment strategy at BNY Mellon Wealth Management, said he expects one to two interest rate hikes this year. The market meanwhile barely prices in one hike for December. "We think the market is more right than the Fed."

"I think it's a lot of uncertainty as the market wrestles with whether the Fed will be tighter than the market wants it to be. What does negative interest rates around the world have to do with stimulating growth? Is it a good thing or bad thing?" said Mortimer.

Some strategist have said the Fed would stay away from a June hike because the U.K. votes whether to stay in the European Union the following week, and that could create risk for financial markets.

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Odds of a Brexit fell below to about 27 percent, down from 37 percent last week, according to Reuters, quoting betting website Betfair. Sterling also rallied Monday, after Friday's comments from President Barack Obama urging Britain to stay in the EU.

Briggs said it's too early to rule out the risk of the Brexit vote for the Fed's June meeting.

Other earnings expected Tuesday include DuPont, Coach, Corning, Lockheed Martin, Whirlpool, Hershey, Freeport-McMoran, AK Steel, T. Rowe Price, Whirlpool and Tenneco. After the bell reports are expected from eBay, Chipotle, Capital One, Buffalo Wild Wings, Panera Bread, U.S. Steel, KLA-Tencor, Akamai, Aflac and TransUnion.

There is also some important data including durable goods, at 8:30 a.m. EDT; S&P/Case-Shiller at 9 a.m. and Services PMI at 9:45 a.m. Consumer confidence and the Richmond Fed survey are reported at 10 a.m. EDT. There is also a five-year note auction at 1 p.m.

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