The key focus in the coming days will be how the US Federal Reserve tweaks its monetary policy position, and what that means for the timing of an interest rate increase.
Last week, the US dollar continued its ascent in anticipation of a lift in rates, rising to the highest level in 12 years against the euro and the highest in more than seven years against the yen.
February's better-than-expected US payrolls report stoked expectations the Fed will begin raising rates as early as June, though a third consecutive monthly drop in retail sales showed the all-mighty US consumer is not spending as much as anticipated and a separate report showed US producer prices declined for a fourth straight month.
The focus is on the word "patient" and whether Fed Chief Janet Yellen and her colleagues will drop it from their policy statement released at the end of the March 17-18 meeting. Yellen will host a press conference. The Fed this week also will release forecasts for economic growth, inflation and interest rates.
Yellen told Congress last month that the Fed's patience meant it probably would not lift rates for at least the next two meetings. The Fed has kept its benchmark rate near zero since 2008.
Last week, the Dow Jones Industrial Average fell 0.6 percent, the Standard & Poor's 500 Index dropped 0.9 percent and the Nasdaq Composite Index slid 1.1 percent. Both the Dow and the S&P 500 have practically erased their 2015 gains.
"If she does remove 'patient', [investors] could get the wake-up call," Torsten Slok, chief international economist for Deutsche Bank Services in New York, told Reuters. Slok sees stocks selling off further in what he calls the "patient panic."
Still, a Reuters poll of about 70 economists found an almost even split between expectations that they will lift interest rates in June or wait until a little later in the year.
"Under our base case, continued inflation weakness will get the Fed to change its tune and refrain from hiking rates in June," Michael Hanson, senior economist at Bank of America Merrill Lynch in New York, told Reuters. "But the Fed does not appear ready to capitulate yet, and will probably keep a June rate hike front and centre in the minds of market participants."
In other Fed news, Governor Daniel Tarullo testifies before the Senate Banking Committee on banking regulation, on Thursday; while Atlanta Fed President Dennis Lockhart and Chicago Fed President Charles Evans speak on Friday.
Data scheduled for release this week include Empire State manufacturing survey, housing market index, and industrial production, due today; housing starts, due Tuesday; weekly jobless claims, current account, Philadelphia Fed business outlook survey, and leading indicators, due Thursday; and Atlanta Fed business expectations, due Friday.
Both the strengthening US dollar, which diminishes the value of overseas corporate earnings for American companies and makes US goods sold abroad more expensive, and the spectre of a less accommodative stance from the Fed is weighing on Wall Street.
The rising US dollar also is checking commodities including oil. West Texas Intermediate crude weakened nearly 5 percent last week, and there might be more to come. Of course the continuing global glut in oil isn't helping either.
"The combination of prospective Fed rate hikes versus QE in Europe and Japan suggests that dollar strength can continue," Nic Brown, the London-based head of commodities research at Natixis, told Bloomberg. "This stronger dollar inevitably implies downward pressure on the dollar-denominated price of commodities. Those used as a safe-haven store of value are most at risk."
In Europe, the Stoxx 600 Index gained 0.6 percent last week pushing the euro-zone equity benchmark to close at its highest level in seven years. Germany's DAX rose for a ninth straight week, closing at a fresh record high on Friday.
Euro-zone bonds also rallied, pushing yields to record lows, while the euro slid, as the European Central Bank began its quantitative easing programme last week. It's buying 60 billion euros worth of bonds per month.
"The ECB is front-loading its purchases in the first week," Societe Generale analysts including head of European rates strategy Ciaran O'Hagan wrote in an investor note, according to Bloomberg. "We have yet to see aggressive ECB buying of the long end, even if the performance of long-dated bonds has been stellar. The right securities to hold remain those illiquid, hard-to-buy bonds in the 15- to 30-year bucket."
ECB President Mario Draghi is set to talk today, in Frankfurt.