Coming Week: Attention Shoppers

The health of the consumer will be under scrutiny amid big retailer earnings reports and inflation data.
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The all-important consumer will have his vital signs checked in the coming week as Wall Street examines a slew of retail earnings, as well as inflation data.

To the surprise of many market watchers, American shoppers have thus far remained remarkably resilient in the face of higher gas prices and rising interest rates. The Commerce Department said Friday that retail sales rose 1.4% last month, well above economists' expectations for a 0.8% increase. Excluding automobiles, sales were up 1% during July, also ahead of estimates.

Furthermore, retailers

Kohl's

(KSS) - Get Report

,

Target

(TGT) - Get Report

and

J.C. Penney

(JCP) - Get Report

all posted earnings last week that topped analyst estimates, contributing to the belief that the average consumer still has some discretionary dollars left.

But while the death of the consumer's ability to spend may have been exaggerated, the fear that he will soon succumb to inflationary forces remains.

"Any shine from these

retail sales data is diminished by the recent acceleration in inflation, which is reducing the inflation-adjusted growth in spending," wrote

RealMoney.com

contributor Tony Crescenzi in his blog Thursday. "This is important because any slowing in personal spending will set off a series of events that ultimately find their way through the rest of the economy."

The market will be able to zero in on inflation with the release of the July producer price index on Tuesday. The PPI is expected to climb 0.3%, after a 0.5% increase in June. Excluding food and energy prices, the core PPI is expected to rise 0.2%, the same as the month before.

The July consumer price index arrives Wednesday before the bell. Economists expect the index to increase 0.4%, compared with 0.2% growth in June. For the core CPI, the consensus estimate is for a 0.3% increase, once again even with the prior month.

"The best-case scenario would be for us to receive reports indicating inflation is moderating and that the economy is stabilizing. However, I'm not overly optimistic about this," says Robert Pavlik, chief investment officer at Oaktree Asset Management. "Our worst-case scenario would be signs that inflation is continuing to grow and that the economy is slowing."

July housing starts also will be reported on Wednesday, providing information on another key issue for consumers: the housing market. Wall Street is looking for the starts to be at a seasonally adjusted rate of 1.81 million on an annualized basis, a decline from 1.85 million in June.

"Homebuilder stocks have been in a free-fall for months now, and this has huge implications for the economy and, in turn, consumer confidence and spending," says Ken Tower, chief market strategist at CyberTrader. "If we get a big deceleration in housing starts it may help the

Fed

avoid further rate hikes, but would signify a greater economic slowdown ahead."

On Thursday, the economic lineup includes leading indicators for July and the Philadelphia Fed Index. The Philly Index, which is expected to rise to 8.3 from 6.0 in February, is a monthly survey of manufacturers located in Pennsylvania, New Jersey and Delaware. It's considered to be a good indicator of changes in employment, price inflation and conditions within the manufacturing industry.

Finally, the preliminary Michigan consumer sentiment survey comes out on Friday. Economists are expecting the index to drop to 83.9 from 84.7 in the prior period.

Retail Detail

Retailers dominate next week's earnings docket, though a few heavy-hitting tech companies also will grab some attention.

Companies scheduled to report earnings on Monday include

Agilent Technologies

(A) - Get Report

,

CA

(CA) - Get Report

and

Netease.com

(NTES) - Get Report

.

On Tuesday, two retail heavyweights,

Wal-Mart

(WMT) - Get Report

and

Home Depot

(HD) - Get Report

, will take the stage.

Wal-Mart, the world's biggest retailer, is expected to post second-quarter earnings of 72 cents a share, according to Thomson First Call. A year earlier, the company earned 67 cents a share. Meanwhile, fellow Dow component Home Depot is expected to report a profit of 92 cents a share, up from 82 cents last year.

Other retailers on tap for reports Tuesday include

Abercrombie & Fitch

(ANF) - Get Report

,

BJ's Wholesale Club

(BJ) - Get Report

,

Saks

(SKS)

and

Staples

(SPLS)

.

The retail round-up continues on Wednesday with reports from

Big Lots

(BLI)

,

Hot Topic

(HOTT)

,

Men's Wearhouse

(MW)

and

Talbots

(TLB)

.

But

Hewlett-Packard

(HPQ) - Get Report

may steal some retail thunder Wednesday. The computer giant will release its fiscal third-quarter results, and analysts are looking for a profit of 47 cents a share, before items. A year earlier, the company earned 36 cents a share.

Rival

Dell

(DELL) - Get Report

, which has had some trouble lately due to aggressive pricing and weak demand, will take its earnings turn on Thursday. The computer maker said last month that it expects to post earnings of 21 cents to 23 cents a share, which was well below analysts' forecast at the time of 32 cents. Analysts have since ratcheted down their EPS expectation to an average of 22 cents, according to First Call.

Still more retailers will report Thursday, including

Sears Holdings

(SHLD)

,

Gap

(GPS) - Get Report

and

Limited Brands

(LTD)

.

Friday's schedule includes retailers

AnnTaylor Stores

(ANN)

,

Foot Locker

(FL) - Get Report

and

Wet Seal

(WTSLA)

.

Randy Diamond, sales trader at Miller Tabak, says that the outlook for retail and retail-related stocks remains negative even if second-quarter results top expectations. "The focus remains on the second half and the response to the latest fall fashion trends," he says.

But profits, of course, always will be fashionable on Wall Street.