NEW YORK ( TheStreet) -- Tuesday trading will be bookended by two very important, though distinct, pieces of economic data: February retail sales and the Federal Reserve Open Market Committee meeting interest rate decision and commentary.

Retail sales are expected to show the resilience of the U.S. economy and the U.S. consumer during this recovery and amid rising gas prices, while the FOMC meeting discussion will ultimately be parsed for each and every word from the Fed hinting that even if the economy is improving there is still the need for more support from the central bank. Any commentary reflecting on the Fed view of the strength of the economy in relation to its previous "moderate" growth expectations, inflation worries, and whether the Fed is willing to undertake QE3, will be the significant triggers, not the rate decision.

These twin reports suggest that the top end of the range, which the market has not been able to push through -- the 1370 to 1380 S&P 500 range -- may remain a lid on bullishness through Tuesday's trading. The Dow Jones Industrial Average traded in a 56-point range on Monday, its narrowest range since last April.

Retail sales has more power to swing the markets if, as expected, the Fed offers no surprises -- keeping interest rates at 0.25% and sticking to its "moderate" economic growth story.

The economist consensus for February retail sales is 1.2%, with the range from 0.7% to 2.1%.

The outperformer for February will be auto sales, and it's important to break out the expected bump in autos from the larger retail sales picture. Excluding autos, the consensus expectation is for a retail sales rise of 0.8%. It's also key during periods of rising gasoline prices to break out the pain at the pump, which actually boosts the retail sales number. Excluding autos and gasoline, the expectation is for a retail sales increase of 0.6%.

The exact level of rise in the retail sales numbers is less important than the data showing the U.S. economic recovery as still on track, even with rising gas prices dominating the headlines.

"We should see pretty good strength in retail, excluding autos," said Sherif Mityas, partner in the retail practice at A.T. Kearney. "We should see strong results across the board from the retail sector, and it will show the continued resilience of the consumer, opening their wallets. The momentum is still there," said Mityas.

The retail expert noted that retailers are no longer having to offer deep discounts like during the holiday season, meaning that both spending and margins are improving and the spring rollout of new merchandise suggests that the steady climb and steady recovery continues, even if there is no "hockey stick" recovery to the retail story.

"There's nothing to suggest there will be a dip, and consistency may be boring to some, but slow and steady is good news for this economy," Mityas remarked.

Ryan Sweet, economist at Moody's Analytics, said the true test for retail sales will lie ahead when the "oil shock" could begin to crimp consumer spending. "The consumer is better positioned now to absorb $4 gas than last year, but the consumer is not immune from higher gas prices. The higher we go from $4, the more damage we will have," the Moody's analyst said.

Sweet said that if the entire retail sales boost is due to autos and gas, the market will react negatively. Moody's is forecasting a retail sales gain of 0.9%, but 0.5% ex-autos, and 0.3% ex-autos and gas prices. "If we are barely eking out a gain ex-autos and gas, then there is reason to be concerned," Sweet added.

In January, retail sales in January jumped 0.4% after no change the month before. The auto sector declined by 1.1%, following a 2.5% gain in December. Excluding autos, retail sales were up 0.7% in January after decreasing 0.5% in December, according to Bloomberg data.

When the market turns its attention to the FOMC rate decision, scheduled for release at 2:15 p.m. ET, no surprise is expected with interest rates to remain at 0.25%. The market will look for ways to read into the Fed statement suggestions of quantitative easing 3 (QE3) -- or some "sterilized" form of it designed to contain inflation. The Fed commentary may also reflect the fact that even if trends like retail sales are on the mend, the overall U.S. growth has trailed Fed expectations in the first quarter.

"There's a good chance that somewhere in the Fed statement it will reflect that fact that GDP has underperformed," said Michael Hanson, U.S. economist at Bank of America Merrill Lynch. Hanson said the market may run with any suggestion that QE3 is on the horizon, because the Fed is currently in the position of forecasting stronger growth for this year than the consensus.

In recent years, the Fed has capitulated several times to economic reality in the periods leading up to QE2 and Operation Twist, and with Operation Twist ending in June, the Fed is nearing a deadline to make its next major QE decision.

Sweet believes the Fed will more or less "sit this one out," continuing to straddle the fence of being cautiously optimistic but not necessarily too upbeat about the economy.

"The Fed will reassess their outlook amid rising energy prices, and the tone will continue to be moderate economic growth," Sweet said.

The 64,000 Fed question is whether a true QE3 is being mulled or a sterilized version, recently rumored in the influential Wall Street Journal Fed column by Jon Hilsenrath. Bank of America Merrill Lynch's Hanson thinks a true QE3 is more likely, while Moody's Sweet believes that a "sterilized" QE3, or what he calls "regular QE3 with a public relations spin," will be the Fed choice since rising energy prices might make a true QE program politically unpopular.

Yet neither economist thinks the market will be doing anything but wishful thinking if it tries to read the tea leaves on Tuesday.

"The Fed has looked optimistic relative to Street GDP consensus but they are nervous. The market may run with whatever the Fed says, and anything that gives a hint rightly or wrongly will get a positive response, but I have a feeling it's baked in already," Hanson said.

-- Written by Eric Rosenbaum from New York

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