The Coming Week: A Time to Reflect

The coming week will be one of reflection for the country and Wall Street in particular as the anniversary of the Sept. 11 terrorist attacks is marked. Appropriately, the economic and earnings calendar is thin, although speeches by President Bush and Alan Greenspan on Thursday could move the market.

The exchanges will open 90 minutes late on Wednesday as moments of silence are observed in downtown Manhattan and elsewhere. Analysts expect trading to be subdued at least through the first half of the week as the Wall Street community remembers men and women who were lost in the World Trade Center attacks.

"Behind the markets are people. Sept. 11 will hang over the market, probably throughout the week," said Doug Porter, senior economist at BMO Nesbitt Burns. Porter expects cautious trading throughout the five sessions.

Down Weeks

The averages staged a minor rally Friday but still couldn't salvage the week. Over the four sessions, the Dow Jones Industrial Average fell 2.7%, ending at 8427. The Nasdaq dropped 1.5% to 1295 and the S&P 500 fell 2.5% to 893.

After the volatility of the past two weeks, market participants probably won't object to some quiet days, although terrorism will undoubtedly be at the back of some minds. "I think there could be selling in preparation," said John Lonski, chief economist at Moody's Investors Services in New York.

The main economic data will come out Friday, led by August retail sales.

"The highlight of the week will be retail sales," Lonski said. The forecast is for an increase of 0.4%, compared with a 1.2% increase in July. Excluding auto sales, the retail sales are expected to increase 0.2%, the same rate as July.

Lonski said sales of cars and trucks will be responsible for the lion's share of any increase in retail spending. Automakers have been dangling zero-percent financing in front of consumers for months. So far, consumers haven't be able to refuse, as is evident in the double-digit August vehicle sales increases that the Big Three U.S. auto makers reported Wednesday.

Pay Paul

But Sung Won Sohn, chief economist at Wells Fargo, warns that other areas of consumer spending may be suffering as consumers lay out for new cars.

"It's a plus, but part of the problem is that consumer spending is so concentrated on autos, the rest of consumer spending is soft," Sohn said.

That could show up in the preliminary September consumer sentiment survey by the University of Michigan, also due out Friday.

"Consumers are worried about their jobs and they've been shell-shocked by the stock market. We shouldn't expect consumer sentiment to rebound in the near future," Sohn said.

The consumer sentiment survey is forecast to come in at 88%, up from 87.6%.

Also Friday, the August Producer Price Index is expected to show a 0.2% increase, compared with a 0.2% decrease in July. The expected increase is being attributed to the recent rise in gas prices, but the risk of inflation is still seen as limited, economists said.

Seeing Beige

The Fed's Beige Book, a report on regional economies that comes out Wednesday, could give some indication about what the Fed might do at its Sept. 24 Federal Open Market Committee meeting.

"The key here is to look for anecdotal evidence on whether things are really weakening or not," said BMO Nesbitt's Porter. "But like the data has been, I think the anecdotal will be mixed as well."

Investors will also keep the usual eye on weekly jobless claims, which come out Thursday. Earnings announcements from HeinzHNZ, Neiman MarcusNMG and AdobeADBE could also pique mild interest.

Two speeches could have an effect on stocks. The first is an address by President Bush on Thursday in which he's thought likely to discuss the administration's plans for Iraq.

"If Bush makes clear a case to act, if it's well received, it's a positive, even if it brings military confrontation, because it clears the air," Lonski said "Now, it's ambiguous, and it makes matters worse for the markets."

And on Thursday, Greenspan goes before the House Budget Committee to speak on the economy.