Next Week's 2 Market-Moving Events

Stocks lost ground on Friday, with the down 0.2%, while the narrower, price-weighted gained 0.1%. Still, with a very respectable 1.7% weekly gain, the S&P 500 managed to claw back most of last week's losses.

On Tuesday and Wednesday, the Federal Reserve's Federal Open Market Committee, or FOMC, will hold its rate-setting meeting. There is next to no chance of a change in interest rates, but investors will be watching closely for any indications regarding the Fed's quantitative easing (bond-buying) program, which is currently running at $85 billion per month. The market's perception is that QE has been a major contributing factor to the stock market's impressive rally since its March 2009 low; that perception is probably correct. As a result, any hint of an "early" withdrawal or reduction in QE could send jitters through the market.

The minutes of the FOMC's last meeting, which was held on March 19-20, showed that the Fed was preparing to taper its QE program as early as this summer -- much earlier than the markets had anticipated. However, some of the key economic data released subsequent to that meeting, including March employment data and last Friday's first-quarter GDP report, have not been encouraging. The U.S. economy added just 88,000 jobs to nonfarm payrolls in March -- too little to make any dent in the unemployment rate. As a result, the FOMC may have become more dove-ish since then.

Speaking of which, next Friday at 8:30 a.m. ET, the Bureau of Labor Statistics will release its April employment report. Last month, the unemployment rate stood at 7.6%; that's down significantly from its October 2009 high of 10%, but as the following graph shows, it remains higher than it has been in all but a few periods in the postwar era:

With the Fed having explicitly tied its rate-setting to the unemployment rate, that number has taken on additional prominence in the eyes of active market participants. Nonetheless, there are still a few investors here and there that still monitor company fundamentals. The earnings season continues, with just over half of the companies in the S&P 500 having reported their results for the first quarter. Among Dow components, health-care companies and will announce their results on Tuesday and Wednesday, respectively.

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