Steady is the watchword for US stocks this week when investors will take in a host of data expected to show the economy's gradual growth is continuing.
Investors usually are reluctant to make any big trading moves before a meeting of the Federal Reserve's policy-making body. The Federal Open Market Committee, which will meet tomorrow, is expected to keep short-term US interest rates at 45-year lows for several months to spur economic growth.
The market's focus will be on the FOMC's take on the economy.
Stocks are expected to trade in a narrow range with volume light as earnings reports give way to the late summer lull.
"For the stock market, I don't expect great fireworks one way or the other unless there is some large geopolitical event," said John Vail, senior strategist at Mizuho Securities USA Inc. "The earnings season is finished and it's the summer doldrums. I don't think any of that data will make a big splash."
Besides the Fed meeting, investors will get a slew of economic data: the retail sales report on Wednesday, the US Producer Price Index on Thursday, followed by the Consumer Price Index and University of Michigan's consumer sentiment survey on Friday. These numbers will grab Wall Street's attention for clues on personal spending, consumers' view of the economy and inflation.
"No one expects the Fed to do anything and I think it's a good bet that they will maintain their position," said Milton Ezrati, senior economic strategist at Lord Abbett & Co. "I don't think there's going to be any news there. I'd be more than surprised if they surprised."
A Reuters survey on August 1 of the 22 top bond dealers on Wall Street who deal directly with the Fed found that 18 see the central bank likely to keep rates on hold well into next year. Four were expecting another cut this year to shore up growth.
In a report in The Washington Post, John Berry, a widely followed Fed watcher with a good track record of forecasting Fed moves, wrote that officials have sent strong signals that in contrast to previous upturns, strong growth will not trigger rate increases for a long time to come because they remain concerned that inflation could fall further despite the return of rapid growth.
For the week, the tech-laden Nasdaq Composite Index fell 4.2 per cent, its biggest weekly percentage drop since mid-January. The blue-chip Dow Jones industrial average rose 0.40 per cent. The broad Standard & Poor's 500 slipped 0.3 per cent.
The stock market got some relief from its recent worries about rising interest rates when the government's successful auction of Treasury notes this week halted a slide in bond prices and a jump in yields last Friday to one-year highs.
On Thursday, the US Treasury sold $18 billion in 10-year notes, the third and last leg of the government's $60 billion refunding drive to close the huge budget deficit.
By Friday's close, the yield on the new 10-year note had dropped to 4.28 per cent from its auction price of 4.37 per cent on Thursday.
July retail sales, due Wednesday, are expected to rise 0.9 per cent after a previous gain of 0.5 per cent, according to economists polled by Reuters.
On Thursday, the US Bureau of Labor Statistics will release the July Producer Price Index, a gauge of inflation that measures wholesale price levels. The overall July PPI is expected to rise 0.1 per cent, a slower pace than its June gain of 0.5 per cent.
On Friday, the Consumer Price Index, or the measure of the change in the cost of a fixed basket of products and services, will be released. The overall CPI is expected to rise 0.2 per cent in July, after a 0.2 per cent gain a month ago, a Reuters poll showed.
This week will be quiet on the corporate earnings front as most companies have already released quarterly results.
But there will be a few noteworthy corporate report cards from industry bellwethers, including Dell Inc., the No. 1 personal computer maker, and Wal-Mart Stores Inc., the discount retailer that's also the world's biggest company in terms of revenues.
"We need to be seeing growth and Dell is such a big computer company that if they're seeing weak sales, that could be a problem," said Peter Dunay, chief markets strategist and options specialist at brokerage Wall Street Access. "At the same time, if they're seeing orders picking up, you could see it helping Intel and some of the other" technology stocks.