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Coming Week: Light Volumes vs. Data Deluge

Trading volumes will be sluggish ahead of the Labor Day weekend, but next week brings a range of economic news, including the August jobs report.

NEW YORK (

TheStreet

) -- After another week of largely disappointing economic data, the stock market looks overdue for a vacation.

And that's exactly where many traders will be next week ahead of the long Labor Day weekend, so volumes are expected to be correspondingly light.

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The tricky part is that angst about the economic recovery -- which has sent equities roughly 5% lower so far this month -- doesn't get a vacation. And aiding and abetting that anxiety will be a raft of economic news, which promises a little bit of everything during the coming -- including a sure-to-be closely watched August jobs report on Friday.

This past week just added to the recent pattern of discouraging data with July existing-home sales falling to their lowest level in more than a decade, July new-home sales sinking 12.4% and durable goods orders growth coming in milder than expected in July. Not even a bigger-than-forecast drop in initial weekly jobless claims on Thursday could offset disappointment stemming from stalled manufacturing activity in the Kansas City region in August, pushing the

Dow

to close below the 10,000-level.

But the market turned a corner Friday as a

downward revision to U.S. economic growth in the second quarter wasn't as steep as feared and

Federal Reserve

Chairman Ben Bernanke emphasized his willingness to take action in support of the recovery.

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"We've finally gotten some good numbers for the first time in weeks," said Lawrence Creatura, vice president at Federated Investors, pointing to initial claims and the GDP revision in addition to Bernanke's comments, which didn't include a reduction to growth forecasts, as some had expected.

"Bearish sentiment has been running high and a lot of money was out of the market, but suddenly there's the sense that it may be time to move money out of bonds and into some riskier assets."

"GDP came in at 1.6% -- that's clearly a deceleration, but the consensus was for growth of 1.4% and the whisper number was calling for 0 or negative, so 1.6% growth sort of set us up," Creatura said, reflecting on Friday's market rally. "Then Bernanke's speech showed him to be very supportive of doing what needs to be done to support growth. It's apparent that he still has bullets and is prepared to use them if needed. I think part of his speech was to counter that August 10th FOMC meeting, which left the markets with a high level of uncertainty. He gave a balanced set of comments and certainly provided the market with the support that it needed."

David Chalupnik, head of equities at First American Funds, said Bernanke appears more optimistic regarding the long-term economic outlook than the market may have expected since he kept the 2011 growth forecast intact.

"That, and the fact that the Fed is ready to provide support was probably a great comfort to the market," Chalupnik said.

Looking ahead to the coming week, he said volume will be slow but that it will be "a very important week as far as economic data is concerned."

The week kicks off Monday morning with July's personal income and spending report at 8:30 a.m. The measures are expected to show growth of 0.2% and 0.3%, respectively, after remaining largely flat in June, according to

Briefing.com

.

On Tuesday, minutes from the Federal Open Market Committee's Aug. 10 meeting will likely be the most anticipated release of the session. But the market will also get data on Chicago-region manufacturing and consumer confidence in August. Both are expected to weaken, with the Chicago purchasing managers index slated to fall to 57.5, from June's level of 62.3, and the Conference Board's consumer confidence index likely to come in at 50, down from 50.4 previously. The Case-Shiller 20-city home price index for July will also garner attention after recent abysmal reads on the housing market.

Wednesday brings the first look at employment conditions ahead of the government's August job report on Friday. Economists expect the ADP report to show a 13,000 increase in private-sector payrolls, according to

Briefing.com

. That compares with growth of 42,000 in July. The market also gets data on July construction spending and August factory activity with the Institute for Supply Management's manufacturing index. Both measures are expected to decline. Construction is slated to slip 0.7% after rising 0.1% in June and the ISM index is projected to come in at 53, after July's reading of 55.5. August auto sales will also be released during Wednesday's session.

On Thursday, Wall Street is projecting a slight uptick in initial weekly jobless claims to 475,000, from 473,000, previously. Second-quarter productivity and unit labor costs are also on tap for Thursday's session, along with July factory orders and pending home sales.

The main event comes on Friday with the Labor Department's August nonfarm payrolls report. Economists are forecasting a 118,000-decline, narrowing from July's drop of 131,000. The unemployment rate is slated to inch up to 9.6%, from 9.5% previously.

The week wraps up with a look at service-sector activity. Wall Street is anticipating an August ISM services index reading of 53.2, compared with July's reading of 54.3, according to

Briefing.com

.

"It's going to be a critical week. I think just the collective weight of all of these numbers will give us a better sense of whether we're at an inflection point or not," Federated Investors' Creatura said.

"Clearly the economy has slowed down -- there's no debate about that. We went from 5% growth in the fourth quarter, to 3.7% in the first-quarter, to 1.6% growth now in the second quarter. So, I'm not going to sit here and say we're going to see strong data points, but I would like to see some of them come in better-than-expected."

"Expectations for the numbers and for the stock market overall are really low," said Chalupnik of First American Funds. "So the numbers that end up coming out will likely be neutral to positive for the market."

According to Chalupnik, it's a good time to start buying.

"The market itself is at a very bearish reading right now, which signals that the bad news has worked itself into the market. We could begin to see a short-term rally," he said.

--

Written by Melinda Peer in New York

.

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Melinda Peer

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