NEW YORK (
) -- Earnings reports will continue to pour in during the coming week, but the recent lull in economic data will come to an end as several important reports are on tap, including the government's jobs report for July.
Economic data lately have taken a backseat to the rash of second-quarter earnings reports, but those roles will be reversed over the next five sessions. During the previous week, 146 constituents of the
and five components of the
Dow Jones Industrial Average
posted quarterly results. Those numbers will drop to 89 and three, respectively, according to Thomson Reuters.
The slower stream of earnings will allow investors to turn their focus back to data that they hope will show an improvement in the U.S. economy. Unfortunately, they will have to wait until Friday for the crown jewel of the week's economic reports, the Labor Department's nonfarm payrolls data for July.
Just how important is Friday's employment report? On Thursday, President Obama said that the economy "has stepped away from the precipice," but he cautioned that job losses remain a major concern. Last month, equities tumbled after the Labor Department said nonfarm payrolls fell 467,000 in June, worse than the expected 375,000 drop -- a sign that Wall Street certainly hasn't become immune to a still-weak labor market.
This time around, economists are forecasting a loss of 333,000 jobs for the month of July, according to
. On the positive side, the unemployment rate is expected to remain below 10%, with economists expecting a tick higher to 9.6% from 9.5% in June.
Paul Mendelsohn, chief investment strategist with Windham Financial, argues that Friday's employment report will be "a wake-up call" for anyone who thought last week's initial jobless claims report, which showed an increase to 584,000, was positive because the claims number didn't rise above the 600,000 level. Things aren't getting worse, but bad numbers are still bad numbers, he asserts.
"While the job losses have helped corporate profits and the stock market, the employment report is going to show that job losses need to improve before the economy is going to turn," Mendelsohn said. "Longer-term, you need people to be employed to spend money and keep the economy lubricated. Until that turns around, you stand a very good chance of a double-dip recession, even if you have positive gross domestic product in the third quarter."
James Paulsen, chief investment strategist with Wells Capital Management, is more optimistic about the jobs number and the subsequent reaction, arguing that the S&P 500 could at least top the 1000 level on a better-than-expected number.
"Certainly, we won't move above it until the jobs report," said Paulsen. "Could we pull back and pause? Sure it could. We really don't have any idea. But as an investor, I feel there is quite a bit of upside still to go. The bigger risk is to the upside rather than down."
After the U.S. stock indices notched their best July performance in two decades, the last thing bulls will want to see is August start off on a bad footing, which makes Friday's jobs report that much more important.
"You may see a pick up in volatility starting next month," said Mendelsohn. "It's been hard to step in front of this market because it has been a roaring freight train."
Of course, the week won't be completely centered around the payrolls data, as each day will bring investors other economic and earnings reports. Monday's economic docket features the July read on the Institute for Supply Management's manufacturing index, due at 10 a.m. EDT. At the same time, the Commerce Department will release the June report on construction spending.
On Monday's earnings front,
will report quarterly results.
Automakers will also report monthly sales for July on Monday, and many observers expect to see some encouraging signs in the data thanks to the "cash for clunkers" program instituted by the Obama administration. The popular program exhausted its entire $1 billion pool in only six days, prompting the House of Representatives to approve a $2 billion extension of the bill on Friday.
The extension debate will shift to the Senate in the coming week, making an improvement in July auto sales that can be pinned to the clunkers program vital to the Senate's vote.
"You have to see some improvement here," Mendelsohn said. "You had $1 billion sucked up just like
. Auto sales have to pick up here." Paulsen adds that a huge focus will be on the sales number, considering the program burned through all the money in less than a week. "It could say a lot about third-quarter GDP and job creation," he said.
Tuesday's economic release schedule includes the Commerce Department's personal income and spending report for June, due at 8:30 a.m. EDT. Shortly after Tuesday's opening bell, the National Association of Realtors will post pending home sales data for June.
Meanwhile, investors will also have their hands full with earnings reports Tuesday, including results from Dow component
Archer Daniels Midland
Whole Foods Market
will also report.
Wednesday's private-sector employment report from
Automatic Data Processing
may give investors an idea of where the government's own number will come in on Friday. Economists are expecting the ADP employment report, released at 8:15 a.m. EDT Wednesday, will show that the private sector lost 340,000 jobs last month.
The economic docket Wednesday will also see the ISM's services index for July and the Commerce Department's factory orders data for June, both scheduled for 10 a.m. EDT release. Turning to earnings, Dow components
Procter & Gamble
will report, along with
Marsh & McLennan
Retailers will be the focus of trading Thursday, as many of the major companies will report monthly sales data before the market opens. In addition, the Labor Department will post weekly initial jobless claims data at 8:30 a.m. EDT. Later in the day,
will release weekly mortgage rates. The European Central Bank and Bank of England will also hold meetings on interest rates Thursday.
fervent shareholders have Thursday circled on their calendars, as the satellite radio company will post quarterly results.
Nasdaq OMX Group
are also slated to release earnings reports Thursday.
Again, Friday's session revolves around the Labor Department's nonfarm payrolls report. There won't be much else for investors to get excited about, as the earnings calendar is very light. Only the
June release on consumer credit data, due at 3 p.m. EDT, is expected to get any attention, but the week will be practically over by that point. It will be everything that leads up to Friday that will certainly shape how the equity markets perform next week.
"You have a lot going on this week, so I have to expect you'll have mixed data coming into that Friday employment report," Mendelsohn said. "If the economic data points in one clear direction, it'll move the market in that one clear direction. But right now, we have everyone so bullish and so sure that GDP growth will be positive in the third quarter, everyone is buying stocks. But what happens after the third quarter?"