Low Volume, High Uncertainty in Coming Week

The coming week brings housing data and retail earnings, but they're unlikely to reduce market uncertainty during lightly traded summer sessions.
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NEW YORK (

TheStreet

) -- Although next week brings key housing and production data, market watchers believe that economic releases will have little to offer a market that's paralyzed with uncertainty.

Fears of a flailing recovery hit a boiling point midweek after the

Federal Open Market Committee reversed its aim to begin tightening monetary policy

.

After downgrading their assessment of economic conditions, policymakers opted to keep the

Federal Reserve's

security holdings at current levels by reinvesting principal payments from mortgage-backed securities into longer-term Treasuries. The move, combined with weaker-than-expected Chinese economic data and an unexpected jump in initial jobless claims on Thursday, spurred a flight to safety that put the major U.S. indices on track to put in one of their worst weekly performances in roughly a month.

"This week, the market was overfrightened by what the Fed said," said Peter Cardillo, chief market economist at Avalon Partners. "I think they got the wrong message. What the Fed really did was say that they'll stay on hold while they assess the economic situation in the very near term. So the message I got was that the Fed is comfortable and not overly concerned that we're going to slip into another recession."

According to Steve Stahler, president of The Stahler Group, an independent financial planning firm, the uncertainty extends well beyond the Fed and is crippling the market.

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"We've got tax increases coming, but they're shrouded in this cloak of secrecy, and no one knows what's going to happen on Nov. 2," he said, referencing the midterm elections. "I think everyone is just watching and waiting -- waiting for more direction as to where the country is headed."

"There are so many opportunities out there, but people are too unsure to take them. They're like deer in headlights: They're not investing; they're not doing anything until they get more clarity. It's a scary, scary time and unfortunately, you can watch all the economic data that you want in these next few weeks, but it's not going to tell you what you really want to know," he said.

Nevertheless, trading could get volatile since volumes will be extremely low as markets head into one of the slowest trading weeks of the year.

Next week's economic releases kick off on Monday with a look at August activity in two key areas: manufacturing and housing. At 8:30 a.m. EDT, the New York Federal Reserve releases its Empire Manufacturing Index, a measure of manufacturing activity in the New York region. That report is followed by the National Association of Home Builders' August housing market index, which gauges not only housing demand but also economic confidence as people aren't willing to buy a house unless they consider themselves to be in strong financial standing.

Housing will hold the spotlight Tuesday as the Department of Commerce reports July housing starts and building permits. Economists expect housing starts to climb to a 561,000 annual pace from June's 549,000 clip. Building permits, however, are slated to fall to a 575,000 annual rate in July, from 586,000 previously, according to Briefing.com.

Tuesday also brings data on wholesale-level prices, which are projected to have strengthened in July by 0.2% after declining by 0.5% in June. Stripping out volatile food and energy prices, the core rate is expected to increase 0.1%, after a similar uptick in June.

Finally on Tuesday, the market will get a read on the strength of production in July as the Federal Reserve issues its monthly report on industrial production and capacity utilization. Wall Street expects mild growth from both measures, with industrial production slated to rise 0.5% in July, vs. previous growth of 0.1%, and capacity utilization anticipated to come in at 74.5%, compared with 74.1% previously.

After two weeks of unexpected increases in initial weekly jobless claims, Wall Street will be watching to see whether claims decline from Thursday's 484,000 level.

The Conference Board's Leading Indicators report for August will likely capture some market attention on Thursday as will the Philadelphia Fed's index. Economists are expecting leading indicators to show growth of 0.2% in August after dropping 0.2% in July, according to Briefing.com.

Although earnings season is winding down, next week brings results from several retailers including

Lowe's

(LOW) - Get Report

on Monday and

Home Depot

(HD) - Get Report

,

Saks

(SKS)

and

Wal-Mart

(WMT) - Get Report

on Tuesday. According to Briefing.com, analysts expect Lowe's, Home Depot and Wal-Mart to post profits per share of 59 cents, 71 cents, and 97 cents, respectively, while Saks is slated to post a loss of 17 cents a share.

Earnings from

Deere

(DE) - Get Report

,

Target

(TGT) - Get Report

and

BJ's Wholesale

(BJ) - Get Report

are also expected on Wednesday.

Quarterly results from food companies

HJ Heinz

(HNZ)

,

Hormel Foods

(HRL) - Get Report

and

J.M. Smucker

(SJM) - Get Report

are scheduled for later in the week.

-- Written by Melinda Peer in New York

.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.