The Federal Reserve could be key for Wall Street this week as investors hear from the U.S. central bank for the first time since a series of moves by its global peers, including the European Central Bank's stimulus plan.
Last Thursday's larger-than-expected QE package from the ECB lifted U.S. stocks, helping indexes post gains after three straight weeks of losses. The upswing didn’t last long, however, and by the end of the Friday’s trading, markets had turned downwards with the Standard & Poor’s 500 Index (SPX) losing 0.6 percent to 2,051.82, paring a weekly gain to 1.6 percent while the Dow Jones Industrial Average dropped 141.38 points, or 0.8 percent, to 17,672.60. The Nasdaq Composite Index gained 0.2 percent.
The stimulus measures from the ECB and elsewhere globally, including the Bank of Canada, may make it tougher for the Fed to move ahead with its own plan to start raising interest rates by mid-year, lest U.S. economic policy move out of sync with the rest of the world.
"Global central policy is not one of their mandates, but I think they have to acknowledge it, because this is not just global economic headwinds, this is actually the moves of other central banks. They've got to take that into account," said Erik Davidson, chief investment officer for Well Fargo Private Bank in San Francisco.
About 6.5 billion shares changed hands on U.S. exchanges Friday, in line with the three-month average. Selling accelerated in the final 30 minutes of trading as materials producers extended declines to 1.6 percent and investors anticipated the results of an election in Greece on Sunday. Opinion polls show the anti-austerity party may win enough votes to take power.