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Jan. 25, 2021, 7:51 a.m. EST

Stock-market bulls brace for major gut check as earnings, Fed and GDP loom

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By Mark DeCambre

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But the Fed’s policies have fostered some of the risk-taking on display, some critics argue. Bears also make the case that the endless money printing will have consequences for the U.S. dollar, for the economy and eventually financial markets in the long-run.

Biden is proposing an additional $1.9 trillion in federal government spending to help extricate the U.S. economy from recession as coronavirus cases and deaths reach a new peak this month.

All that may confer added significance to next week’s Fed gathering.

“All eyes will be on Chair Powell at next week’s FOMC meeting. We look for him to strike a more optimistic, yet cautious tone,” wrote economists Lydia Boussour and Gregory Daco of Oxford Economics, in a Friday research note.

In recent speeches, Powell has already indicated that the Fed isn’t eager to pull back on monetary policy accommodation soon, including raising interest rates from historic lows or tapering its asset purchases, a source of support for financial markets.

The Fed meeting kicks off on Tuesday, with Powell & Company delivering its policy update on Wednesday at 2 p.m. Eastern, followed by a news conference hosted by the chairman.

On Thursday, a day after the Fed’s decision, market participants will await the official report card on the health of the U.S. economy.

According to consensus estimates among U.S. economists polled by MarketWatch, the U.S. economy may have grown about 4% on an annualized basis in the final three months of 2020, which would be phenomenal ordinarily, but comes on the heels of a 33.4% increase in the third quarter.

Still, if the GDP reading continues to show upward progress, it may underscore that the economy is moving in the right direction even as the coronavirus pandemic continues to rage.

After all that is said and done if the Dow, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.36% and the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.10% are still in spitting distance of record highs , the bulls may find themselves even more emboldened.

/zigman2/quotes/210599714/realtime
US : S&P US
4,185.47
+15.05 +0.36%
Volume: 2.21B
April 16, 2021 5:15p
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/zigman2/quotes/210598365/realtime
US : Nasdaq
14,052.34
+13.58 +0.10%
Volume: 4.03M
April 16, 2021 5:16p
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