For the stock market, things have gone from looking very bad to very good in a hurry.

It was just a few weeks ago that investors were bracing themselves for the worst. The economy had turned too hot, and inevitably the

Federal Open Market Committee would push through a series of rate hikes. This raised the prospect that, in their effort to slow the economy, the central bankers would slam on the brakes a little

too

hard. Not a pretty thought.

But over the past two weeks, there's been a string of reports suggesting the economy has slowed down.

New home sales

, the

Purchasing Managers Index

, the all-important

employment report

-- all came in softer than forecast. There's little doubt that if the FOMC met tomorrow, instead of June 27 and 28, it would leave rates on hold.

But then again, the

Fed

won't

be meeting tomorrow, and there are reports out in the coming week which could shift the odds in the other direction. This is probably why the

fed funds futures, which have been an impressive tool for predicting future FOMC moves, indicate a 50% chance of a quarter-point hike -- even though only a handful of economists believe that will happen.

"It's premature to feel that the final policy verdict on the June meeting has been written," said Bill Sullivan, chief money-market economist at

Morgan Stanley Dean Witter

.

The crucial day will be Wednesday, when the May

Consumer Price Index -- the key U.S. inflation report, comes out.

"This is a critical series, not only for the market, but the policy makers as well," said Sullivan. "It will go a long way to shaping the ultimate probability of a rate hike."

Though clearly the most important, there are other big economic reports due. May retail sales comes out on Tuesday, the

Philadelphia Fed's

survey is on Thursday, and

housing starts

are set for release Friday. And along with the CPI on Wednesday, investors will get a gander at the

Beige Book, a summary of anecdotal information on the economy collected by the district Federal Reserve banks.

The

last Beige Book, which came out in early May, described an incredibly hot job market, but the latest employment report suggested things are starting to soften. "Is this sense of moderation in labor market activity reflected in the anecdotal evidence?" asks Sullivan. "It will be interesting to see if they provide any evidence of slack coming into the labor market."

Yet for all the worry that recent economic reports are somehow aberrant, suggesting a slowdown that hasn't really come yet, the odds that the economy is cooling certainly seem higher than they were last month. That's encouraging.

"We still need a little more to prove things are settling down," said

Salomon Smith Barney

equity strategist Jeff Warantz. But "we are feeling better having begun to see more economic numbers showing the Fed's rate hikes are having the desired effect.

"We've had a nice string of numbers," he continued. "I don't think the Fed's done yet, but it would appear we are closer to the end of the rate hikes. Obviously, that's a plus for the market."