By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- Investors are bracing for a turbulent
week ahead when Federal Reserve policymakers decide whether to
start winding down their bond-buying program.
Look for a brief stock pop if a reduction isn't announced, says
Steven Wieting, global chief investment strategist at Citi Private
Bank. "A small near-term rally now seems likely if tapering is
postponed, as most still expect," Wieting wrote. If the Fed starts
scaling back the bond-buying program in December, stocks are likely
to get hit harder than they did in the summer, when they managed to
rise through a spike in bond yields.
But he also said that for long-term investors, the decision to
start or delay the tapering will not make much difference.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank,
anticipates a $10 billion reduction in Treasury purchases only,
leaving the pace of mortgage-backed security purchases intact as
the first tapering step. Read: Fed wants to exit QE but keep
long-term rates low.
The FOMC convenes on Tuesday for its two-day policy-setting
meeting. It's scheduled to announce the verdict on tapering on
Wednesday afternoon. The $85 billion bond-buying stimulus added
more than $1 trillion to the Fed's balance over the past year,
benefitting equity markets, which so far have recorded one of their
best yearly gains in a decade.
According to a Wall Street Journal survey, more than half of 46
surveyed economists expect the Fed to announce a reduction in the
pace of its bond purchases by the end of January as the economic
outlook brightens.
But their forecasts vary for the exact timing of the taper. A
fourth of the economists see the central bank announcing an initial
reduction on Wednesday, a third expect it in late January and
another third see it coming at the Fed's March meeting. Two
economists expect the taper to come after March, according to the
Journal survey.
Last week, when traders regarded good news as bad news, because
it increased the likelihood of tapering, markets endured selling
after retail sales figures showed that U.S. consumers spent money
more easily in November and particularly on Black Friday.
The S&P 500 (SPX) , which reached a closing high of 1,808.37
last Monday, has gained 24% year-to-date but closed the week with a
loss.
The Dow Jones Industrial Average (DJI) has clocked a 20% gain
this year. It had a rocky week during which it dropped more than
100 points two days in a row.
The technology-heavy Nasdaq (RIXF) is far ahead with a more-
than 32% gain since the start of the year, taking it above the
significant 4,000 level.
The three benchmarks lost 1%-2% over the past week. Healthcare
and telecoms sectors on the S&P 500 were the worst performers,
dropping 2.6% and 2.4% respectively.
Stocks to watch: Nike, Oracle, AMC
Nike Inc. (NKE) takes the mantle as the first blue-chip
component to report quarterly earnings after Alcoa Inc (AA) was
dropped from the Dow Jones Industrial Average. Nike is scheduled to
report its quarterly results on Thursday.
Oracle Corp. (ORCL) and FedEx Corp. (FDX) also report results
next week.
AMC Entertainment is scheduled to make its IPO debut next week.
The movie-theater chain has been offering moviegoers a chance to
buy stock in its upcoming IPO.
Stock moves: Twitter Inc. (TWTR) gained 28% over the past week
as investors regarded the company well positioned for selling
ads.
Facebook (FB) gained more than 10% over the past week after news
it would join the S&P 500 index, replacing Teradyne Inc.
(TER)
Lululemon l(LULU) lost 15% of its market cap over the past week
after the yoga-inspired apparel retailer warned of a weaker
outlook.
Hilton Worldwide Holding (HLT) had a successful IPO debut,
jumping 7.5% on the first day on Thursday.
More from MarketWatch:
J.P. Morgan sees 20% gain for S&P 500 in 2014.
5 money moves to make before January.
Week in charts: Stocks, homes boost household net worth.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires