The micro-analysis of what the Federal Reserve is thinking kicks into high gear Wednesday, with more Fed-speak that could offer clues about when it might start pulling back on its market-friendly stimulus.
The Fed will release minutes of its June 18-19 meeting, and Chairman Ben Bernanke is giving a speech. "All eyes should be on the Fed," says Karee Venema, an analyst at Schaeffer's Investment Research.
The Fed roiled markets the last time they released minutes, on May 22, when they first hinted at cutting back later this year on their aggressive bond-buying program, which has pushed borrowing costs lower and stock prices higher. On June 19, the Fed reiterated its plans to start "tapering" its $85 billion in monthly purchases of mortgage-backed bonds and long-term Treasury notes in coming months. Bernanke said it could be wound down completely by mid-2014 if the unemployment rate, now 7.6%, dips to 7%, as the Fed expects.
Friday's strong June jobs report has Wall Street expecting the Fed, which meets July 30-31, to start pulling back as early as its September meeting. Investors blinked at the initial thought of less Fed support, with stock market falling almost 6%. But strong job gains and recent signs of an improving economy have sparked a rally that has stocks back near record highs.
We're looking for "any hints of the exact timing and size of the tapering of the Fed's asset purchases," says Paul Dales of Capital Economics.