Coming Week: Concerns for Credit

Exactly how much the real economy has been affected will have a direct bearing on the Fed's interest rate decision at its Sept. 18 Federal Open Market Committee meeting, which is something market strategists will be watching closely.

Put simply, the worse things are looking in the economy, the larger will be the potential reduction in the fed funds rate. And it does seem clear that some form of a cut is coming. Miller Tabak says the fed funds futures market is pricing in a 100% chance of a quarter-point cut at the September meeting, with another quarter-point cut expected by year-end.

On Wednesday, the Fed publishes its Beige Book report detailing activity in the different regional economies, which will further help analysts get a reading on how the central bank will be thinking.

Friday rounds out the week with unemployment and payroll data from the Department of Labor.

The consensus estimate is calling for the jobless rate to remain steady at 4.6%, with payrolls adding 120,000 new positions, up from 92,000 in the prior period.

But because the measurement period doesn't cover the whole of the credit troubles, the market will likely "discount" the jobs data somewhat, says Joe Brusuelas, chief U.S. economist at IDEAglobal in New York. For that reason, he says, action will be driven more by forward-looking speculation about the strength of the credit markets.

Monthly auto sales from the likes of Ford (F Quote), GM (GM Quote) and Toyota (TM Quote) are also expected, as are chain-store sales from the nation's retailers.