Wall St watches Fed and data this week

Trader Gregory Rowe, left, works on the floor of the New York Stock Exchange. File photo / AP

A US Federal Reserve meeting, a slew of economic data including the US government's monthly jobs figures, and plenty of quarterly earnings this week should help investors decide whether equities near record highs have room to move higher.

The Federal Open Market Committee is scheduled to start its two-day meeting on Tuesday and is expected to announce another US$10 billion reduction to its monthly bond-buying programme, reducing it to US$45 billion. More importantly, investors are hoping for even more assurances that the central bank will keep interest rates near record lows for longer.

While Fed Chair Janet Yellen is not scheduled to give a press conference on Wednesday after the FOMC releases its decision, the next day she is to speak to the Independent Community Bankers of America, in Washington.

Investors will also closely watch the latest corporate earnings. Tech companies including Twitter, eBay, and LinkedIn; oil companies including ExxonMobil, Chevron, and ConocoPhillips; and drug companies including Merck, GlaxoSmithKline and Bristol-Myers Squibb are among those scheduled to release results in the coming days.

The earnings season is off to an OK start but has failed to help drive Wall Street to fresh records. Of the 239 companies that have released results this season, 75 per cent have beaten analysts' profit estimates, while 53 per cent have surpassed sales forecasts, data compiled by Bloomberg show. It's important to note that expectations had been pared back in advance.

Last week, the Dow Jones Industrial Average fell 0.29 per cent, the Standard & Poor's 500 index slipped 0.08 per cent, while the Nasdaq Composite index shed 0.49 per cent.

And some companies, particularly in the tech sector, have downright disappointed. Shares of Amazon tanked on Friday, shedding 9.9 per cent, amid concerns that the company's expenses continue to surge.

"You've seen a prick in the bubble of some of these tech stocks," Pat Becker, a fund manager at Becker Capital Management in Portland, Oregon, told Bloomberg News. "It's been a momentum driven market in some names and that momentum has ceased."

Oil companies, on the other hand, might have increased in appeal.

"These big energy companies that pay dividends and have solid buyback programs are more defensive in nature as long as the price of the underlying commodity holds up," Mike O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut, told Reuters.

The coming days will also offer many clues on the state of the world's largest economy.

On Friday, a Labor Department report will show American employers added 215,000 workers in April, the most since November, while the unemployment rate fell to 6.6 per cent, from 6.7 per cent in March, according to a Bloomberg News survey.

Other reports scheduled for release include the pending home sales index, and the Dallas Fed manufacturing survey, due today; the S&P Case-Shiller home price index, and consumer confidence, due Tuesday; the ADP employment report, GDP, and the employment cost index, due Wednesday; weekly jobless claims, motor vehicle sales, the PMI and ISM manufacturing indices, due Thursday; and factory orders on Friday.

In Europe, the Stoxx 600 added 0.3 per cent last week. Meanwhile, Germany's DAX advanced 0.7 per cent, while the UK's FTSE 100 rose 0.9 per cent.

Here, most markets will be closed for the May 1 holiday.

The Bank of Japan is scheduled to gather on Wednesday and will provide its twice-yearly report on the country's economic outlook.