What's ahead for the stock market

A slew of important economic reports are due in the week before Labor Day. The key event Friday: The big jobs report for August.

By Charley Blaine Aug 27, 2010 7:58PM
Charley BlaineNormally, the week before Labor Day is quiet on Wall Street. Volume peaks early and fades steadily into Friday when those who haven't disappeared already leave early for the long weekend.

This year, it's likely to be a noisy week.

It's true that there aren't a lot of earnings reports with the potential to move markets next week. If you want candidates, try construction equipment maker Joy Global (JOYG), homebuilder Hovnanian (HOV), food giant H.J. Heinz (HNZ) and the Toronto-Dominion Bank (TD) .

The real action will come in how the markets react to important economic reports that will come every day, starting with a report on personal income for July on Monday and ending with the big report on August payroll employment and joblessness on Friday.

In fact, the week ahead has the potential to look and feel like the one that preceded it: Lots of arguing and lots of volatility, all building up to Friday. Here's what to look for.

Article continues below.
The week begins with bulls feeling relatively chipper after Friday's big rally. The Dow Jones industrials ($INDU) enjoyed a 165-point gain to 10,151.

But as big as the rebound was, it wasn't enough to prevent the blue chips -- and the Standard & Poor's 500 Index ($INX) -- from experiencing their third weekly loss in a row.

The Nasdaq Composite Index ($COMPX), meanwhile, suffered its second weekly loss in three weeks.

Here's what to expect from major reports and other data:

Personal income and spending for July, due Monday from the Commerce Department. Personal income may offer some cheer because of gains in private wages, IHS Global Insight forecasts. The economic consultants see income rising 0.4%, following a June with no gain. There will be little growth in spending and only nominal inflation pressures.

Consumer confidence, due Tuesday from the Conference Board. A number of surveys show stabilization in confidence, despite all the worries about the markets.

The index is expected to inch up to 52.5 in August after falling for two months in a row. That would match the small improvement already announced Friday in the Reuters/University of Michigan sentiment index.

S&P Case-Shiller Home Price Index, due Tuesday morning. Nomura Securities is forecasting that the widely watched index will show a 3.1% year-over-year rise for June, down from a year-over-year gain of 4.6% in May. Other measures of house price growth have suggested house price inflation began to cool in midsummer. This may signal the beginning of a downward trend in home prices going forward.

Chicago Purchasing Managers Index, due Tuesday. This can move markets. Nomura sees the index falling to 56.0 from 62.3 in August (a reading of 50 indicates growth). Other regional manufacturing surveys released for the month have shown the economy softening.

Minutes from the Federal Reserve's Aug. 10 meeting, due Tuesday at 2 p.m. ET.The members of the Federal Open Market Committee, the Fed's rate-making body, have been arguing with each other a lot about how much stimulus the economy needs from the Fed. The disagreement should appear in the minutes. But conditions have softened since the meeting that the disagreements may be buried for now.

The Institute for Supply Management Manufacturing Index for August, due Wednesday.
This report is a biggie, and most analysts believe it will reflect the economy's slow slog downward. Orders and production indicators have been struggling, and backlogs and inventories are just drifting.  Vendor performance should improve (i.e. delivery times should quicken), which will be a drag on the ISM headline.  The Eastern regional surveys were all either lackluster or downbeat. IHS Global Insight sees the index falling from 55.5 in July to 51.5. Nomura Securities is looking for a reading of 53.5.

U.S. auto sales for August, due Wednesday from automakers. The auto industry has seen mostly steady growth since the end of the Cash for Clunkers program last summer. Expects sales to hit an annualized 11.6 million units, up slightly from July's 11.5 million units.

Construction spending for August, due Wednesday from the Commerce Department. Based on dismal reports on building permits and housing starts and on new and existing home sales, don't hold your breath for a good report.

Jobless claims, due Thursday morning from the Labor Department. The department reported claims for the weekend ending Aug. 21 at 473,000, down from the prior week's 504,000. There are hopes that the Aug. 14 filings were the worst.

Factory orders for July, due Thursday from the Commerce Department. Orders for manufactured goods likely increased by just 0.3% from June. That's a reflection of the weakness that has swept over the economy this spring.

Pending home sales, due Thursday from the National Association of Realtors. This looks at sales contracts signed but not expected to close for up to two months. The expiration of tax credits in April gutted sales for the next several months. But some in real estate have argued a rebound should start to emerge this fall.

ISM non-manufacturing index, due Friday from the Institute for Supply Management. Expect a small decline in the index to 53, which means growth is still going on. A bright spot in the report: Travel and tourism services appear to be holding up well. Visits to Yellowstone National Park hit a new high this summer.

Payrolls and unemployment for July, due before the Friday market open from the Labor Department. Most analysts see the national unemployment report rising slightly from July's 9.5% rate. IHS sees a 9.6% rate; Nomura is looking for 9.7%. Expect another decline in nonfarm payrolls as the Census Bureau continues to drop workers and as state and local governments cut back. IHS sees private employment growing by 30,000. Nomura sees only 15,000.

Markets for the week



8/27/2010

8/20/2010

% chg.

YTD chg.
Dow industrials

10,150.65

10,213.62

-0.6%

-2.7%
S&P 500

1,064.59

1,071.69

-0.7%

-4.5%
Nasdaq 

2,153.63

2,179.76

-1.2%

-5.1%
Russell 2000

616.76

610.78

1.0%

-1.4%
Crude oil 

$75.17

$73.82

1.8%

-5.3%
(per barrel)











U.S. Dollar Index 

82.97

83.16

-0.2%

6.1%
10-yr. Treasury

2.65%

2.61%

1.5%

-31.0%
Gold

$1,237.90

$1,228.80

0.7%

12.9%
(per troy ounce)












The peak of earnings season was the week of Aug. 16, and there won't be another flood of reports until October. Here are the key reports:

Monday: Supermarket chain Winn-Dixie Stores (WINN).

Tuesday: Bank of Nova Scotia (BNS), discount retailer Dollar General (DG).

Wednesday: Aircraft maker Bombardier (BDRAF), H.J. Heinz, Hovnanian and Joy Global.

Thursday: H&R Block (HRB),  Krispy KremeDoughnuts (KKD) and Toronto-Dominion Bank.


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