Coming Week: Added Anxiety

The outlook for the coming week is much the same as it was a week ago: rising anxiety amid a torrent of earnings, with developments in Washington, D.C., providing a potential wildcard.

Whereas last weekend many traders were looking ahead to President Bush's State of the Union, this weekend finds them focused on the country's economic commander in chief: Ben Bernanke.

The Federal Open Market Committee holds its latest two-day policy meeting on Tuesday and Wednesday. The Fed is certain to leave rates unchanged at the meeting, but the accompanying policy statement Wednesday will -- as always -- be parsed for any hints of the future of monetary policy.

The analysis is always crucial, but it takes on added significance this time around. The past week saw market participants come to a realization that not only is the Fed highly unlikely to ease rates anytime soon, but it might actually be inclined to raise them in 2007.

The statement will likely include "an adjective or two with a hawkish tone; in case there's a lagged impact of housing cooling off they can move to cut [later in the year] and retain their credibility," Joseph Brusuelas, chief U.S. economist at IDEAglobal, said in an interview on TheStreet.com TV Friday.

A rate hike, while still far-fetched, has come on investors' radar screens in the wake of recent stronger-than-expected economic reports, including housing sales and durable goods (ex-autos) late last week. Those reports were accompanied by rising Treasury yields as fixed-income traders continued to unwind previous bets for an economic recession and accompanying rate cuts.