Retailers in the Headlines, but Focus Is on Fed

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Earnings from several retailers are a highlight Tuesday, but traders will keep their focus on anything to do with the Fed.

The CEOs of Apple and JPMorgan Chase are both in the hot seat for different reasons Tuesday morning. JPMorgan holds its shareholder meeting in Tampa at 10 a.m. ET, and the big focus will be on whether investors vote to allow Chairman and CEO Jamie Dimon to retain both roles.

(Read More: Splitting Dimon's Roles 'Misguided': Ex-Director)

Apple CEO Tim Cook, meanwhile, appears before a Senate panel at 9:30 a.m. on corporate tax avoidance. The Senate Permanent Subcommittee on Investigations said Apple is using tax havens in Ireland to avoid taxes, but Apple says the tax law should be changed and it is doing nothing wrong.

As for earnings, Home Depot, Saks, TJX, Best Buy, Dick's Sporting Goods, and Autozone all report ahead of the opening bell. Retailers will be watched for what impact cold spring weather has had on margins and what managements have to say about their outlook and the consumer.

Consumer-related data has been a relative bright spot, holding up better than manufacturing data recently. Retail sales for April, up a surprise 0.1 percent, were one of the only positives in a recent string of disappointing economic reports. The other piece of encouraging data recently was consumer sentiment, reported at a six-year high Friday.

Stocks slipped Monday, and the focus is now on whether the Dow can pull off a Tuesday gain, giving it a record 19 positive Tuesdays in a row, a pattern traders are watching. The Dow was off 19 at 15,334, and the S&P was off 1 at 1666. The indices both moved to record highs during the trading day, and the Russell 2000 broke 1000 for the first time. A move lower in the dollar helped brake the selling in gold and silver, which both closed higher Monday.

Comments from Chicago Fed President Charles Evans triggered reflex selling in stocks Monday, when he spoke about the economy improving and possibly achieving escape velocity next year. Some traders took that to mean the dovish official would support paring back on Fed bond purchases. But following those remarks, he reiterated that he would like to see several months of strong payroll data before the Fed begins to cut back on its $85 billion a month in Treasury and mortgage purchases.

Last week, several hawkish Fed officials said they thought the Fed should start tapering back purchases soon. So, the markets are now waiting to see what Fed Chairman Ben Bernanke has to say about the economy and policy when he speaks before the Congressional Joint Economic Committee Wednesday.

There are two Fed speakers Tuesday. St. Louis Fed President James Bullard speaks at 11:30 a.m. ET at a conference in Germany on monetary and financial stability, and New York Fed President William Dudley is participating in a panel discussion at the Japan Society in New York at 1 p.m.

"We're waiting to see what the Fed has to say. There's no data of note," said Art Hogan of Lazard Capital Markets.As the market traded quietly Monday, the talk about complacency picked up. "By and large, the indexes we look at, the volatility stuff we look at is just left for dead. There's no fear. No craziness. Nothing is doing anything. There's always put buyers, but there's a lot more call buyers," said one options trader.

(Read More: Sell in May Fails to Appear; Markets Await Bernanke)

Steve Massocca of Wedbush Securities said the market feels extremely overbought. "The put/call ratio is plumbing new lows," he said, adding it's at level of two puts for each call, close to where it was in October 2007. The put/call ratio is watched as a contrarian indicator, and when bullishness—or excessive call buying—takes over, it is sometimes seen as a warning.

Even though many analysts see signs of wear, there is also a sense that the momentum is in charge.

"There's still an awful lot of skepticism so it does seem we're still going higher," said Marty Leclerc, portfolio strategist with Barrack Yard Advisors. "It's a strong rally. It's as strong a rally as I've ever seen." Leclerc said the market is riding high on the liquidity the Fed has added to the system.

"We're at a point in the market cycle where every bit of news is construed as good for stocks, which makes me a bit wary," he said.

(Read More: The Market Is Not the Economy: What the Fed Misses)

What Else to Watch

There are after-the-bell earnings from Intuit, NetApp, Compuware, and Analog Devices.

As for Apple, it said in prepared remarks Monday that it didn't use "gimmicks" and that it paid an "extraordinary" amount of taxes, nearly $6 billion in taxes in 2012.

The Senate subcommittee said an Apple subsidiary in Ireland earned $22 billion in 2011 and paid only $10 million in taxes, and that the company is holding $102 billion of its $145 billion in cash overseas.

The subcommittee also examined Microsoft, Hewlett-Packard and others, finding they too avoided billions in taxes by shifting income overseas and taking advantage of ambiguous tax laws.