Wall Street's summer comes to a close next week with what could be a toxic mix for stocks: No major earnings, an overload of A-list economic data, a storm headed for the Gulf of Mexico and trading desks staffed with third-string dealers.
August payrolls and minutes from the Fed's last meeting may lead to choppy trading when plenty of market players will be on vacation during what for many is the last week of summer in the United States before schools reopen after the Labor Day holiday on Sept. 4.
If you think volume stunk this week, wait until you see next week, said Barry Ritholtz, fund manager at Ritholtz Capital Partners in New York.
Volume has been really light, so whatever activity you see going on in the market, you have to take with a grain of salt. It's kind of like the kids are redecorating the living room and then, when the parents come back, they put it back the way it was.
Looming over the market is a mounting debate among strategists and economists over whether the United States is heading for a gradual economic slowdown, or a full-fledged recession, especially after weaker home sales this week.
The slowdown in the housing market is bigger than people thought and the market is worried about the knock-off effect of the slowdown in consumer spending, said Kurt Karl, chief U.S. economist at Swiss Re New Markets in New York.
Investors will get a sense of how worried the consumer really is on Tuesday with the release of consumer confidence data, forecast to show a decline this month from July. The University of Michigan will release the final reading of its August consumer sentiment survey on Friday.
A snapshot of both ends of the retail spectrum will come on Thursday, with deep-discount chain Dollar General Corp. and luxury jewelry retailer Tiffany & Co. both set to report earnings.
WAGES AND WEATHER
The week's most widely watched indicator will be the August nonfarm payrolls report, due on Friday. Economists polled by Reuters forecast that 120,000 jobs were added in August, up from 113,000 in July.
With the Federal Reserve remaining vigilant about inflation, the market will be on the alert for any unexpected increase in average hourly earnings. The forecast calls for wages to go up 0.3 percent in August, after July's gain of 0.4 percent, the Reuters poll showed. The August unemployment rate is pegged at 4.7 percent, down from July's 4.8 percent.
Investors may get a sense of where the Fed stands on inflation and growth on Tuesday when minutes from the last Federal Open Market Committee rate-setting meeting are released.
In addition to wages and inflation, the weather will be on Wall Street's watch list.
Bad weather brewing in the eastern Caribbean Sea could be dubbed Tropical Storm Ernesto later on Friday and could grow into a full-fledged hurricane by next week, forecasters said. [ID:nN25201567]
The ghost of Katrina is arriving right on schedule in the form of the next Caribbean storm. That's going to be on people's minds, said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co. in Lake Oswego, Oregon. It will play into oil concerns and whether there will be any interruption to transportation and industry in the Gulf Coast states.
Hurricane warnings could put the shares of insurers, oil producers and refiners in the spotlight next week.
The good news is that it looks like insurance carriers will be less vulnerable this year since they were able to raise rates and reduce their exposure to insured properties, Dickson said.
On Friday, both the Dow and the S&P 500 ended the session lower after the storm threatening the Gulf of Mexico sent crude oil prices higher. Traders were reluctant to have positions open over the weekend. The Nasdaq rose slightly.
The blue-chip Dow Jones industrial average ended on Friday at 11,284.05, down 20.41 points, or 0.18 percent. The Standard & Poor's 500 Index finished at 1,295.09, down 0.97 of a point, or 0.07 percent. The Nasdaq Composite Index closed at 2,140.29, up 3.18 points, or 0.15 percent.
For the week, all three major U.S. stock indexes fell. The Dow declined 0.9 percent, while the S&P 500 shed 0.6 percent for the week and the Nasdaq dropped 1.1 percent.
U.S. crude oil for October delivery rose 15 cents to settle on Friday at $72.51 a barrel on the New York Mercantile Exchange. For the week, the price of NYMEX October crude was up 0.6 percent.
Iran's dispute with major world powers over its nuclear ambitions will stay on Wall Street's radar screen in the coming week. The deadline is Thursday for a United Nations nuclear watchdog report that will certify whether Iran has stopped uranium enrichment-related activity or not.
No one's been around as you've seen, the volume has been pretty light, and we're subject to more volatility that will continue into next week as well, said Tim Woolston, portfolio manager at Boston Advisors Inc.
Among the major economic indicators on tap are preliminary data, actually a second look, at second-quarter gross domestic product, on Wednesday, followed by August indexes from purchasing managers in the Chicago and New York areas, plus July factory orders - all due on Thursday.
Those traders and strategists who aren't on the beach will be watching for key inflation data before Thursday's opening bell with the release of July personal income and consumption data. That report will include one of the Fed's favorite inflation measures, the core personal consumption expenditures index, or the core PCE index. It excludes volatile food and energy prices.
The Institute for Supply Management is scheduled to report its August reading on U.S. manufacturing activity on Friday. The ISM index is expected to edge higher. Domestic car and truck sales for August, which are expected to come in at a slower pace than July's sales, also will be out on Friday.
EARNINGS: TECH AND TAX PREP
A handful of earnings reports from technology companies are due next week, including telecommunications equipment makers ADC Telecommunications Inc. and Ciena Corp., as well as business software maker Novell Inc. and optical network equipment maker JDS Uniphase Corp.
H&R Block Inc. is expected to report earnings on Thursday. But the tax preparer already said this week it expects to take a charge for losses related to rising delinquencies by subprime mortgage customers, prompting a downgrade of the stock by UBS on Friday. (Wall St Week Ahead runs weekly. Any questions or comments on this column can be e-mailed to: jennifer.coogan(at)reuters.com) (Additional reporting by Vivianne Rodrigues and Caroline Valetkevitch)