Investing.com - Political rhetoric could hang over the market in the coming week, as investors await U.S. President Donald Trump's annual State of the Union address to Congress on Tuesday.
The speech comes as Trump begins the second two years of his first term facing major challenges, including a long-running probe into whether his 2016 presidential campaign colluded with Russia, as well as investigations by House Democrats of his presidency.
This week is also peppered with a handful of appearances from Federal Reserve officials, most importantly Chairman Jerome Powell on Wednesday, as investors look for further hints into the outlook for monetary policy in the months ahead.
The Fed last week signaled that its three-year drive to tighten monetary policy is close to an end due to rising headwinds to the economy.
On the data front, market players will keep an eye out on the Institute for Supply Management’s (ISM) survey on service sector activity to gauge the strength of the economy.
Meanwhile, in earnings, about 90 S&P 500 companies are due to report financial results this week, in what will be one of the last big waves of the fourth-quarter earnings season.
Elsewhere, the Bank of England will hold a policy meeting, though no change is expected amid ongoing uncertainty over Brexit.
Investors will also be watching for any important developments on the U.S.-China trade front, with the two sides racing to strike a deal before a March 2 deadline.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. President Trump's State of The Union Address to Congress
President Donald Trump will make his annual State of the Union address to Congress at 9:00PM ET on Tuesday.
Trump signaled on Friday that the speech will include extensive remarks about his standoff with Democrats over building a wall along the U.S.-Mexico border, the subject of an intense partisan battle that prompted a 35-day partial government shutdown that ended a week ago.
Beyond the wall, a senior White House official said that Trump will outline what he sees as areas where Republicans and Democrats may be able to find agreement. These include a plan to fund infrastructure improvements across the country, lower the cost of prescription drugs and work to resolve long-standing differences over healthcare.
An excerpt of the speech released by the White House on Friday made clear Trump would strike a compromising tone in at least part of his address.
"Together we can break decades of political stalemate, we can bridge old divisions, heal old wounds, build new coalitions, forge new solutions and unlock the extraordinary promise of America’s future. The decision is ours to make," Trump will say.
Whether the two sides are prepared to work together in any significant way is far from clear, with tensions still high over the shutdown fight and another deadline approaching on Feb. 15.
2. Fed Speakers
A number of Fed speeches will get market attention in the week ahead, as traders watch for further clues on interest rates.
Topping the agenda will be remarks from Fed Chair Jerome Powell, who will be speaking Wednesday at a town hall meeting for teachers, in Washington DC at 7:00PM ET.
Speeches from Fed Vice Chair Richard Clarida, Cleveland Fed President Loretta Mester, St. Louis Fed President James Bullard and Fed Governor Randal Quarles will also be in focus.
Last week, the U.S. central bank left interest rates on hold and pledged to be patient with further interest rate hikes. It also said it could alter the pace of its balance sheet reduction "in light of economic and financial developments".
The Fed's announcement left market expectations for an interest-rate hike this year hanging by a thread, and raised the chances of a cut in 2020, according to Investing.com's Fed Rate Monitor Tool.
3. U.S. ISM Services PMI
An ISM survey on service sector activity for January due at 10:00AM ET (15:00 GMT) on Tuesday is forecast to inch down to 57.0 from the previous month's reading of 57.6.
Besides the ISM data, this week's rather light economic calendar also features data on factory orders, trade figures, and weekly jobless claims.
Data released on Friday showed that U.S. job growth surged in January, with employers hiring the most workers in 11 months. With key data from the Commerce Department, including the fourth-quarter gross domestic product report, still delayed because of the government shutdown, the employment report is the clearest evidence yet that the economy remains on solid ground.
4. Alphabet, Disney Highlight Busy Week of Earnings
There are about 90 S&P 500 companies reporting results in the week ahead, as the earnings season on Wall Street continues.
Nearly half the S&P 500 companies had reported for the fourth quarter by Friday morning, with 71% beating earnings estimates, while 62% have beaten revenue estimates.
Alphabet (NASDAQ:GOOGL), Clorox (NYSE:CLX), Sysco (NYSE:SYY), Gilead Sciences (NASDAQ:GILD), and Seagate Technology (NASDAQ:STX) are on the agenda for Monday.
Results from Walt Disney (NYSE:DIS), Snap (NYSE:SNAP), Viacom (NASDAQ:VIAB), Electronic Arts (NASDAQ:EA), BP (NYSE:BP), Archer-Daniels-Midland (NYSE:ADM), Ralph Lauren (NYSE:RL), Estee Lauder (NYSE:EL), and Tableau Software (NYSE:DATA) will capture the market's attention on Tuesday.
General Motors (NYSE:GM), Eli Lilly (NYSE:LLY), Spotify (NYSE:SPOT), Chipotle Mexican Grill (NYSE:CMG), Take-Two Interactive (NASDAQ:TTWO), Regeneron (NASDAQ:REGN), Humana (NYSE:HUM), Boston Scientific (NYSE:BSX), Cummins (NYSE:CMI), Trivago (NASDAQ:TRVG), GoPro (NASDAQ:GPRO), iRobot (NASDAQ:IRBT), Match Group (NASDAQ:MTCH), Zynga (NASDAQ:ZNGA), FireEye (NASDAQ:FEYE), and Sonos (NASDAQ:SONO) report results on Wednesday.
Thursday sees Twitter (NYSE:TWTR), Grubhub (NYSE:GRUB), Expedia (NASDAQ:EXPE), Yum! Brands (NYSE:YUM), Dunkin Brands (NASDAQ:DNKN), Philip Morris (NYSE:PM), News Corp (NASDAQ:NWSA), Kellogg (NYSE:K), Mattel (NASDAQ:MAT), Skechers (NYSE:SKX), Tyson Foods (NYSE:TSN), Tapestry (NYSE:TPR), and World Wrestling Entertainment (NYSE:WWE) post earnings.
Finally, Arconic (NYSE:ARNC), Cleveland-Cliffs (NYSE:CLF), Phillips 66 (NYSE:PSX), and Hasbro (NASDAQ:HAS) are among the few reporting on Friday.
5. Bank of England Policy Announcement
Governor Mark Carney and his fellow interest rate-setters are expected to keep borrowing costs on hold at 0.75% when the Bank of England makes its policy announcement at 7:00AM ET (12:00 GMT) on Thursday.
Economists expect a 9-0 vote by the MPC in favor of leaving rates steady.
The BoE's new inflation forecasts will be watched as a sign of whether it thinks investors are being too relaxed by betting on no follow-up rate hike until late 2019.
Money markets have cut the probability of a BoE December rate hike to around 55%, versus 62% a week ago.
Besides the BoE, political headlines will also be in focus as investors watch developments surrounding ongoing Brexit negotiations.
With around 50 days until Britain leaves the EU, the government has yet to agree a divorce deal with Brussels, as Prime Minister Theresa May's Conservative party remains split on how close the country should remain to the bloc.
-- Reuters contributed to this report