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 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.

Fed fund futures are now priced for a 1% chance of a rate hike by the end of March and 2% odds for a hike by May 31, according to Miller Tabak. In early December, the same markets had 8% odds on a January rate cut, 32% odds for easing in March and 84% for a May cut.

In addition to the Fed policy statement, Wednesday also brings the advance fourth-quarter GDP report and employment cost index.

"Keep in mind that the markets are consumed with data concerning the strength of the economy, the level of inflation and the near-term direction of interest rates, and these reports will address all three of these concerns," writes Robert Pavlik, chief investment officer and senior portfolio manager at Oaktree Asset Management.

Overall, it's a busy week for economic news, including consumer confidence on Tuesday, Chicago PMI and construction spending Wednesday and personal income/spending and auto sales data on Thursday.

All the above is a warm-up for Friday's January payroll data, as well as factor orders and University of Michigan consumer sentiment index.

Beyond the macroeconomic data, the next batch of earnings is the other obvious issue likely to affect trading in the week ahead.

Among the slew of reports are Dow components Verizon ( VZ) on Monday; Procter & Gamble ( PG), 3M ( MMM) and Merck ( MRK) on Tuesday; Boeing ( BA) and Altria ( MO) on Wednesday; and ExxonMobil ( XOM) on Thursday.

In addition to earnings, traders will be looking for news about Altria's long-awaited spinoff of its majority stake in Kraft Foods ( KFT). The company plans to set a date for the spinoff on Wednesday, The Wall Street Journal reported.

Outside the Dow, reports are due from heavyweights such as Google ( GOOG), Starbucks ( SBUX) and ( AMZN), along with hundreds of others .

Trading during earnings season is always treacherous, as Jim Cramer explained in Friday's Wall Street Confidential video . Furthermore, "the things going to move markets -- none of us knows about," says Michael Driscoll, senior managing director of listed trading at Bear Stearns. "There is something but you and I don't know what it is. We'll know when we see the headline."

Indeed, the theme for 2007 is "expect the unexpected," according to Driscoll, who notes the consensus view coming into 2007 was for higher volatility, and thus far the consensus has been right.

Amid dramatic intraday and day-to-day moves, the S&P 500 is up just 0.3% year to date.

"As goes January, so goes the year?" the trader wonders. "There could be a lot of movement, but when all is said and done you may look at averages up or down 5%. The swings are going to be very gut wrenching" along the way.

Look for more of the same in the week ahead.
Aaron L. Task is editor at large of In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He appreciates your feedback; click here to send him an email.