This week will pale in comparison to last week, but energy prices will remain in the spotlight. Last week, data on consumer prices was a bit of concern, putting more weight on the PPI this week. Crude prices will remain a focus after closing the week at $113.77 and losing ground in 8 of the past 10 sessions. Below is the calendar for the coming week, which is on the light side:

Monday: Housing Market Index

Tuesday: ICSC-UBS Store Sales, Redbook, Producer Price Index, State Street Investor Confidence Index

Wednesday: MBA Mortgage Applications, EIA Petroleum Status

Thursday: EIA Natural Gas Report, Jobless Claims, Leading Indicators, Philadelphia Fed Survey

Friday: None

Consumer prices for July came in much higher than expected with the headline figure rising 0.8 percent, double estimates. The core rate, which excludes food and energy prices, rose 0.3 percent, a tenth higher than anticipated. Year on year, the headline figure is up 5.5 percent, half a percent higher than in June. The core rate came in at 2.5 percent, a tenth more than in June. This news was raised concerns about the Fed needing to raise rates to offset pricing pressures. On Tuesday, the PPI data for July is expected to show growth of 0.5 percent with the core rate up 0.2 percent.

Retail sales data for July released last week were below expectations, falling 0.1 percent. When auto sales are excluded, retail sales rose 0.4 percent, but both figures were a tenth below estimates. Overall, economists are pleased with how well consumer spending has held up despite elevated energy prices, a soft labor market and falling housing prices. Even the end of tax rebate checks hasn’t led to problems in spending like many expected.

In related news, consumer sentiment improved slightly in August to 61.7 from 61.2 in July as measured by the University of Michigan consumer sentiment index. Though these readings remain very low, economists are looking at the direction of the index and were pleased to see inflations expectations fall 3-tenths to 4.8 percent for one-year.

The housing sector is one major reason for the downturn in economic growth in the U.S. On Tuesday, data on housing starts will be released with economists looking for starts to fall to 0.950 million in July from 1.066 million in June. Inside the data, economists will be looking at the strength in single family units, which have been the weak spot in the sector.

Last Friday, data on manufacturing was positive with the Empire State Mfg. Survey and the Industrial Production report both better than expected. Manufacturing activity in the New York area rose to 2.8 when a reading of -2.8 was expected. The six-month outlook improved dramatically to 34.6 from 15.6 in the prior month. Industrial production rose 0.2 percent in July when a flat reading was expected. The manufacturing component of the report rose 0.4 percent. The Philly Fed Survey is expected to improve slightly in August, but remain negative at -15.0.

Besides economic data, traders will be listening to what Fed leaders have to say at a symposium in Jackson Hole at the end of the week. Fed Chairman Bernanke will kick off the event and his words will be dissected for any clues as to what the Fed has in store for interest rates.

Over the weekend, there were comments by an OPEC leader saying that production cuts might be needed at the September 9 meeting. OPEC governor Mohammad Ali Khatibi stated that the market is oversupplied by about 1 million barrels a day. This could put upward pressure on commodity prices to start the week, but a strong dollar could keep prices down.


Jody Osborne

Senior Staff Writer & Options Strategist

Optionetics.com ~ Your Options Education Site

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