Coming Week: Summer Stress

The junk bond market's calendar of new deals remains quite full with leveraged buyout financing, though many of the week's struggling deals, such as Dollar General's(DG Quote), pushed through.

"All in all a huge calendar got done," says Matt Fuller, analyst at Standard & Poor's Leverage Commentary & Data. "The market closes a rough month on solid footing, but the forecast is for more volatility."

While the market rebounded Friday to close off its lows, last week's volatility led the Dow Jones Industrial Average to rise just 0.4% for the week to 13,408.62. The S&P 500 closed up less than one point at 1503.35, and the Nasdaq Composite, Apple(AAPL Quote) iPhone hype and all, added just 0.6% on the week. Apple itself fell 0.8% over the five days.

The Dow Jones Transportation Average finished the week off just 0.2%, but the investment banking and brokerage sector suffered harsh blows. Bear Stearns slid 2.6% on the week as others like Merrill Lynch(MER Quote), Goldman Sachs(GS Quote) and Lehman Brothers(LEH Quote) each fell more than 1% in the week amid financial meltdown fears.

ISM, Jobs Reports on Tap

In addition to the ongoing credit-market concerns, there will be plenty of economic data in the mix. The Institute for Supply Management's reports of U.S. manufacturing activity and service sector activity are expected to come in strong Monday and Thursday, respectively. Analysts have forecast readings of 55 for manufacturing and 58 for services.

The data are unlikely to surprise, as most economists and traders now are well aware of reaccelerating U.S. economy. Traders will be focusing in on the prices-paid components in the reports and the employment levels.

Inflation is still a concern as the Fed's slightly more dovish missive last week failed to move to neutral. Rather, the Fed kept its tightening bias and expressed lingering concerns about core inflation given the tight labor market and high energy and other commodity prices.

The other big release for the week will be Friday's nonfarm payrolls report, which is expected to register a healthy addition of 120,000 jobs in June.

Any job market weakness is expected to show up in the construction and manufacturing sectors, with strength coming out of the education, health, leisure and hospitality, and business services sectors, according to Ethan Harris, chief economist at Lehman Brothers. He also notes that the report may reveal more upward pressure on wage inflation, with an expected gain in average hourly earnings of 0.3% in June.

Elsewhere, on Tuesday traders will digest pending home sales, which are expected to rise after two months of sharp declines.

The earnings calendar is nearly empty next week, but investors will be watching for preannouncements next week ahead of the kickoff to earnings season on July 9, when Alcoa(AA Quote) reports.

Currently, analysts project a 4.1% growth rate for second-quarter earnings, and companies with strong overseas operations are expected to lodge more solid gains, says David Dropsey, senior analyst at Thomson Financial.

In addition to Alcoa, the first week of earnings season brings reports of companies with large foreign presences such as Pepsi Bottling(PBG Quote) and General Electric(GE Quote), among others.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting