US stocks to take cue from Fed

LAST week, the US stock market's record run paused and it will remain on hold this week unless there are pleasant surprises from the Federal Reserve or the price of petrol.

The US central bank takes centre stage with its latest policy statement on Wednesday. While it's virtually guaranteed that Janet Yellen and her board will continue the gradual unwinding of quantitative easing known as tapering, traders will listen for hints about the next step.

If, as in the minutes from the last meeting, the Fed emphasises concerns about weakness in the housing market, traders will likely buy stocks in the belief that the "doves" in the central bank are holding sway, and that rate hikes are not on the table any time soon. If, however, the Fed's statement plays up recent signs of rising inflation, traders could sell stocks in the belief that the "hawks" are in charge.