By Sinead Carew
NEW YORK (Reuters) - In an ordinary world, a U.S. Federal Reserve meeting, jobs data and a hefty number of earnings reports next week would provide investors with welcome distraction from speculation about the U.S. president's policy plans.
But the current world is less than ordinary. In the second week after Donald Trump's inauguration, issues such as his controversial immigration policies will likely keep his voice ringing louder in investors' ears than the words of Fed Chair Janet Yellen.
Wall Street has already bet on solid economic data, strong earnings and the pace of Fed interest rate hikes, but investors are still uncertain how to bet on the president.
On Friday Trump ordered a 120-day hold on allowing refugees into the country, an indefinite ban on refugees from Syria and a 90-day bar on citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen.
The action has sparked confusion and anger after immigrants and refugees were kept off flights and left stranded in airports and was met with international criticism, outrage from civil rights activists and legal challenges.
"I don't see how markets could look on this favorably," David Kotok, chairman and chief investment officer of Cumberland Advisors, said late Saturday. "International tensions are raised. Obstacles to peaceful exchanges are abruptly announced. And litigation commences."
Kotok said stocks may react negatively as the market is ripe for a correction, and for "current market prices to be justified, the Trump agenda must unfold perfectly."
While stocks have risen since the Nov. 8 election on hopes for tax cuts, lighter regulation and fiscal stimulus, investors are waiting for evidence Trump has the willingness and ability to follow through on his pro-business campaign promises.
On top of this, add to the uncertainty the fear of his threats to slap massive tariffs on imports and his comments on China's currency policy.
"Wall Street's already figured out that the recovery is in place, that the Fed is going to start getting aggressive. What they haven't figured out yet is, exactly who is Donald Trump," said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.
Fed fund futures show bets of a 96-percent chance the Fed leaves rates unchanged when it ends its two-day meeting on Wednesday, according to Reuters data.
Investors will watch for hints of policymakers' plans for the rest of 2017. If their language indicates faster-than-expected hikes, "the equity rally could pause as investors recalibrate," said Paul Christopher, head global market strategist at Wells Fargo Investment Institute in St. Louis.
But investors don't see the Fed rocking the boat next week, at least until it has some clarity on Trump's policies.
"Like many of us, the Fed is probably waiting to see what is going to come of all the new policies and changes that can be expected out of the new administration," said Tim Dreiling, senior portfolio manager at the Private Client Reserve at U.S. Bank in Kansas City.
Strong fourth-quarter corporate earnings and forecasts have partly driven the S&P 500's <.SPX> 10-percent increase since Nov. 4, and many big companies are due to report next week.
A few weeks into the reporting season, analysts now expect quarterly earnings to have risen 6.8 percent, up from an expectation of a 6.1 percent gain on Jan. 1, according to Reuters data. This growth rate would be the fastest in two years.
'TRUMP IS SERIOUS'
On Friday, the U.S. is expected to report 171,000 new non-farm jobs were created in January, up from 156,000 in December. Unless the number is below 100,000 or above 300,000, stocks will likely not move sharply, according to Wells Fargo's Christopher.
"If the data coming in are unremarkable, it would tend to turn attention back to Washington," he said.
Aside from seeking clarity on Trump's pro-business policies, the market will also watch for signs of whether the president will help or hurt foreign trade. For example, the administration has said it would tax imports from Mexico to help pay for a new wall to secure the border. But such a tax could push inflation higher, nudging the Fed closer to tightening policy.
Investors are also nervous about the implications if Trump officially declares China a currency manipulator, as he has implied he might do.
The best-case scenario would be that he sits down to negotiate trade concessions with the world's second-biggest economy, said Wells Fargo's Christopher.
"I think Trump is serious about getting things done, but he does have to reckon with the fact that even as the most powerful person in the world he does have to work with others," he said.
(Additional reporting by Chuck Mikolajczak and Megan Davies; Editing by Rodrigo Campos and Nick Zieminski)