While few people are expecting the

Federal Reserve

to make a move on interest rates next week, the central bank's policy statement could set the tone for the market over the coming days.

Recent signs of strength in the economy and Fed Chief Alan Greenspan's somewhat upbeat testimony before Congress in July have helped to crush expectations for another rate cut this month. But the Federal Open Market Committee meeting on Tuesday will still be a significant event for investors.

Analysts expect policy makers to say that the risks of disinflation

or declining inflation still outweigh the risk of a big pickup in inflation. That could provide support to the bond market, which has sold off sharply since mid-June as investors stopped worrying about outright deflation and started to focus on some solid data.

The Fed is expected to acknowledge the improving economic indicators but will likely temper its remarks by saying the economy hasn't yet shown signs of sustainable growth.

While the central bank has hinted that it will not raise interest rates for an extended period of time, expectations for a rate hike in January 2004 have moved higher over the last two weeks and fed funds futures contracts for June of next year show a 50-basis-point increase in rates from current levels. The Fed last cut interest rates on June 25, reducing the funds rate by 25 basis points to just 1%.

"I think the Fed is going to calm the markets where they've been roiled," said Bill Rhodes, chief investment strategist at Rhodes Analytics. "In all likelihood, they'll say that if we do have a problem, they'll provide all the liquidity the market needs. That's what the market really wants to hear."

Rhodes said he is looking for stocks to consolidate going forward, however, because the market is in a seasonally weak period. "I don't see anything that's going to lift the market, but I don't think we necessarily have to see a huge selloff either," he said, noting that the major averages held their support levels "reasonably well" this week.

Peter Cardillo, chief strategist at Global Partners Securities, agrees with this view. "I think the summer doldrums will continue and we'll stay in a tight trading range," he said.

Cardillo isn't expecting any bold moves from the Fed next week but thinks it will probably attempt to clarify its position to the bond market. "I suspect they'll give hints that deflation is not a problem and that inflation is more of an issue."

A more balanced risk assessment would be a positive for corporate America because inflation allows firms to raise their prices, but such remarks could potentially spook the bond market, sending yields higher.

The yield on the 10-year Treasury note fell to 4.29% this week after hitting a one-year high of 4.59% last Friday. Even with the decline, however, interest rates are well above their June 13 level of 3.11%.

Aside from the FOMC meeting, investors will also be focusing on some important economic data and a couple of key earnings reports.

On Wednesday, the Commerce Department will release its retail sales figure for July. The report often moves the market because it shows how consumer spending has been holding up. Analysts expect a 0.8% rise compared to a 0.5% increase in June. Also on Wednesday, import and export prices for July are due for release, as are business inventories for June.

Thursday brings the July producer price index, trade balance and weekly unemployment claims. The PPI will be important for both stocks and bonds, revealing how much wholesale prices have risen in the period. Analysts are calling for a 0.2% increase vs. a 0.5% increase in the prior month. The core PPI, which excludes food and energy, is expected to be flat compared to a 0.1% decline in June.

A key reading on consumer prices, industrial production data and a consumer sentiment report from the University of Michigan will round out the week's data on Friday. The CPI is slated to rise 0.2%, while the core rate is seen rising 0.1%.

While the earnings season is largely over, several big names are expected to post results in the week ahead.

Applied Materials

TST Recommends

(AMAT) - Get Report

will report Tuesday followed by

Wal-Mart

(WMT) - Get Report

on Wednesday and

Dell Computer

(DELL) - Get Report

on Thursday. Analysts expect Dell to earn 14 cents a share, while Applied Materials is projected to earn 4 cents.

Wal-Mart said this week that it would exceed forecasts for the second quarter due to stronger-than-expected July same-store sales. Analysts are calling for the retail giant to report earnings per share of 50 cents. A slew of other retails will also announce their results next week, including

J.C. Penney

(JCP) - Get Report

,

Ann Taylor

(ANN)

and

Tiffany

(TIF) - Get Report

.

"It'll be a pretty heavy loaded week, with earnings from Dell, AMAT and a host of retail companies," said Daniel Morgan, fund manager at Noble Financial. "Everyone will try to get an idea whether retail sales will continue strong. Looks like the back-to-school season was good, helping

to lift retailers."