Federal Open Market Committee members “really want to start the normalization process but they don’t want markets to plunge,” said Bob Baur, chief global economist for Principal Global Investors.
Fed minutes from the January meeting released this past Wednesday showed a more dovish central bank than analysts expected.
However, underlying strength in U.S. economic data still gives many market watchers the expectation that an interest rate hike will come as early as this summer.
Bill Stone, chief investment strategist at PNC Wealth Management, said he still sees a rate hike in July, based on good economic data.
“I think the minutes reflect that they are open-minded to change if things weaken considerably,” Stone said.
To be sure, the U.S. economy is still growing slowly. Wall Street expectations according to Reuters are for revised 2.1 percent growth in the fourth quarter, down from the prior quarter’s 3.9 percent.
“It appears that GDP will be revised down substantially,” said Baur. But I “think it’s already worked into the market.”
U.S. stocks rallied on Friday to close at highs on an 11th-hour resolution between Greece and its creditors in the euro zone, temporarily settling weeks of negotiations.
The Dow Jones industrial average ended up more than 150 points to 18,140.44, its first record close for 2015.
“This obviously is a relief for the markets,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “Looks like my 2,125, 2,150 (on the S&P 500) is likely to be achieved early next week.”
“All in all,” said Jack Ablin, chief investment officer at BMO Private Bank, it “looks like the global economy may be turning for the better.” He highlighted weak areas such as Europe and Japan as “moving together to the upside.”
Marc Chaikin, CEO of Chaikin Analytics, also expects markets to go higher.
The “markets are on very solid footing,” he said. “With earnings out of the way there’s not much to stimulate the market until April.”
Oil continues to be a weak spot in markets, as WTI crude settled down 82 cents to $ 50.34 a barrel on Friday. Energy was the only sector to close in the red in the S&P 500.
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The U.S. 10-year Treasury note yield edged up on Friday to as high as 2.13 percent on the Greek deal.
Baur said without concerns about deflation in Europe, the 10-year yield should be 3 percent and recommended instead to put money into shorter-duration bonds.
On tap next week:
Earnings: BHP Billiton, HSBC, Dish Networks, Agrium, ExpressScripts, Tenet Healthcare, Texas Roadhouse
8:30 a.m.: Chicago Fed National Activity
9:45 a.m.: PMI Services Flash
10:00 a.m.: Existing home sales
10:30 a.m.: Dallas Fed manufacturing survey
Earnings: Comcast, Home Depot, AmericanTower, Bank of Montreal, Macy’s, Toll Brothers, Cracker Barrel, Domino’s Pizza,Hewlett-Packard, Boston Beer, Dreamworks Animation, First Solar, Papa John’s(tentative), WebMD Health
9:00 a.m.: S&P Case-Shiller HPI
10:00 a.m.: Consumer Confidence
10:00 a.m.: Janet Yellen speaks
10:00 a.m.: Richmond Fed manufacturing index
1:00 p.m.: Two-year note auction
Earnings: Lowe’s, Campbell Soup, ChesapeakeEnergy, Dollar Tree, Target, TJX, SodaStream, L Brands, Liberty Media,Salesforce.com, Transocean, Workday
7:00 a.m.: Mortgage Applications
10:00 a.m.: New Home Sales
10:00 a.m.: Janet Yellen speaks
10:30 a.m.: Oil inventories
1:00 p.m.: Five-year note auction
Earnings: A-B InBev, Kohl’s, Chico’s FAS,SeaWorld, Autodesk, Gap, Ross Stores, United Health Services, Herbalife, JCPenney, Live Nation Ent., Splunk, Weight Watchers
8:30 a.m.: CPI
8:30 a.m.: Durable Goods orders
9:00 a.m.: FHFA Home Price Index
10:30 a.m.: Natural gas inventories
11:00 a.m.: Kansas City Manufacturing Index
12:40 p.m.: Fed’s Lockhart speaks
1:00 p.m.: Seven-year note auction
4:30 p.m.: Fed balance sheet/money supply
8:30 a.m.: GDP
9:45 a.m.: Chicago PMI
10:00 a.m.: Consumer Sentiment
10:00 a.m.: Pending Home Sales
10:15 a.m.: Fed’s Dudley speaks
10:15 a.m.: Fed’s Mester speaks
1:30 p.m.: Fed’s Fischer speaks
3:00 p.m.: Farm prices