By Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- In the children's story about
Goldilocks, the little girl with that name eventually runs
away.
Given the Federal Reserve's signal that it may scale back
monetary stimulus later this year, perhaps the stock market's
demand for so-called "Goldilocks" economic reports also will go
away.
That term has referred to data that aren't too hot, but also
aren't too cold, just like the porridge that's eaten up in the
fairy tale. MarketWatch has used the term from time to time this
year.
A bad economic report is obviously bad, but some strategists
have warned that excessively positive reports would mean the Fed
would start to wind down its stimulus measures.
Well, the Fed has now signaled clearly that it's ready to do
exactly that if the economic recovery remains on track as the
central bank expects it to.
This week's economic reports -- which include durable goods,
consumer confidence and new-home sales -- will probably point to
steady if lackluster growth. Read a preview of the week's economic
reports.
Bruce Bittles, chief market strategist for Robert W. Baird &
Co., isn't convinced the Fed actually will be able to cut back as
soon as it expects on its $85 billion--per--month bond-purchase
program.
"Our feeling is that the Fed is not going to take their foot off
the pedal, because the economy is not going to be able to reach
escape velocity," he told MarketWatch on Friday.
In addition, he said he thinks the Goldilocks concept was an
illusion anyway, and that good news is always good news.
The coming week could provide more details about what the Fed
was thinking with its latest policy decision. Fed officials have a
bevy of speeches scheduled.
Dallas Fed President Richard Fisher, not a voting member of the
Fed's rate-policy committee, will speak on Monday. He'll be
followed by three Fed officials delivering speeches on Thursday,
then four speaking on Friday.
The central bankers also could share what they think of the
market reaction to their decision. The Dow Jones Industrial Average
(DJI) endured its worst two-day loss since 2011 after the Fed news,
resulting in a weekly loss of 1.8%.
The S&P 500 (SPX) shed 2.1% for the week, while the Nasdaq
Composite (RIXF) dropped 1.9%. For all three stocks indexes, it was
the fourth down week in five weeks. Discouraging news from China
teamed up with the Fed news to wallop stocks, gold and other
assets, while the 10-year Treasury yield jumped to 2.53%.
Home builder stocks and exchange-traded funds suffered
especially big losses. They could recover this week, however, if a
couple of earnings reports from that sector surpass
expectations.
Lennar Corp. (LEN), which lost 9.7% for the week, will report
its quarterly earnings before the open Tuesday, while KB Home
(KBH), down 8.5% for the week, will post its results before the
open Thursday. Home builders sold off as investors wagered that
demand could suffer thanks to the Fed news.
As the easy-money era ends, interest rates will rise and make
home loans more expensive. That's bad for home builders.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires