NEW YORK - This week could be the moment of truth for US stocks. Investors will look to see if the Federal Reserve delivers on the expectation that it is poised to pause after more than two years of raising interest rates.

Friday's payrolls data -- considered to be a key factor in the Fed's rate-setting decision -- showed weaker-than-expected July job growth, and analysts said that could be enough to prompt the Fed to halt its rates increases when it meets on Tuesday.

After the employment report, US interest-rate futures showed less than a 15 per cent perceived chance the Fed will raise rates by 25 basis points on Tuesday, compared with a chance of about 43 per cent before.

Investors have been trying to guess when the central bank might pause in its rate-raising campaign, and have been anticipating for months that the end of the tightening cycle is near. The Fed has raised interest rates 17 consecutive times since June 2004, driving its benchmark fed funds rate for overnight bank loans up to 5.25 per cent from 1 per cent, the lowest it had been in almost four decades, when the tightening cycle began.

"Right now, 'Topic A' is the Fed, and we're looking at jockeying for position ahead of the Fed meeting and announcement on Tuesday," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co. in Lake Oswego, Oregon.

Barry Hyman, equity market strategist at EKN Financial Services Inc., in New York, said Friday's headlines about slower job growth in July gave stock investors the facts they needed to back up weeks and months of hoping for relief from the Fed's relentless string of rate rises.

"The Street believes the Fed's out of the way," Hyman said. "We can now go on with the process of healing the economy without higher interest rates to come. It's a start. "The equity players like that. The bond market certainly does."

The yield on the benchmark 10-year US Treasury note fell to 4.90 per cent, its lowest since early April, after the July jobs report came out on Friday. Before the report, the 10-year note's yield was at 4.96 per cent, the same as it was late on Thursday.

EARNINGS SLOW TO A TRICKLE

The earnings agenda is expected to be light, with the second-quarter reporting period near an end. Among top companies expected to report results are El Paso Corp., a natural gas producer and pipeline company; Cisco Systems Inc., the Nasdaq stalwart and network equipment maker, and American International Group Inc., the world's largest insurer. All three companies are part of the S&P 500. AIG also is a Dow component.

Most forecasts show profit growth for S&P 500 companies of at least 11 per cent for the second quarter from the year-ago period, which would mean roughly four years of double-digit gains.

Estimates' latest forecast puts earnings growth at 12 per cent, up from a forecast of 11.7 per cent a week ago, senior market analyst Ashwani Kaul said.