Traders will be focused on Chairman Ben Bernanke as he oversees his first Fed gathering early in the coming week. But unless he brings a big surprise, the market may see more movement after a data deluge hits the tape later on. "The start of the week is all about the Fed and the end of the week is all about the economic data," says Paul Mendelsohn, strategist at Windham Financial. "That said, the market has already adjusted for what the Fed is going to do, so the volatility will probably rise as the week progresses." The two-day Fed meeting kicks off Monday. The central bank has raised rates by a quarter point at each of its last 14 meetings, and it's almost universally expected to boost rates by another quarter point Tuesday. Such a move would bring the benchmark overnight lending rate to 4.75%. With the Fed's next move almost a certainty, Miller Tabak sales trader Randy Diamond wonders how much more upside is left in equities. "In the face of more concerning housing data, stocks rallied
on hopes of a Fed slowdown but nothing has changed in the Fed's mind," says Diamond regarding Friday's lower-than-expected new-home sales numbers, which also showed that inventories had reached their highest level in 10 years. "We've already played out the 'Fed's almost done' theme." On Tuesday morning, consumer confidence figures for March will be released. Economists surveyed by Thomson First Call are expecting a reading of 102, up from 101.7 in February. Later that afternoon, the FOMC policy statement will be announced. Thursday sees the release of fourth-quarter final gross domestic product, which is anticipated to be revised to 1.7% from the current reading of 1.6%. The chain deflator, a key inflation gauge, is expected to remain at 3.3%.
Friday will be the biggest day for economic reports, starting with personal income and spending figures for February. Economists expect income levels to show a rise 0.4%, compared with growth of 0.7% in January. Spending is projected to have fallen 0.1% after rising 0.9% the prior month. Also on Friday, Chicago PMI for March is expected to rise to 57 from 54.9 in February, while factory orders for February are expected to show 1.4% growth after a drop of 4.5% in January. "It's a catch-22," says Larry Wachtel, senior market analyst at Wachovia. "If any of these numbers comes in too strong, it's going to hurt stocks because it means the Fed is going to keep hiking."