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Equity investors, perilously close to major support level on the key indices, face a gut check in the coming week.

Fears abound. Investors are worried about everything from consumer stamina to the second-quarter preannouncement season to more terrorism. All that with the major indices closing in on their Sept. 21 lows, with few big earnings reports to distract the market's attention.

After May

retail sales data and the June

consumer sentiment index disappointed expectations last week, investors are bracing for more bad news.

"Given that investors are worried now about the consumer, I would look at things like real earnings and housing starts," said Subodh Kumar, CIBC World Markets equity strategist.

While positive economic data haven't been enough to get people interested in the market over the past few weeks, the indices are now at levels where it might start to make a difference, he said.


Nasdaq Composite Index has fallen some 16% since the middle of May to close Friday at 1505, putting it just 82 points above its Sept. 21 low of 1423. The

S&P 500 closed Friday at 1007, or 41 points above its Sept. 21 low of 965.8. The

Dow Jones Industrial Average is on higher ground. The blue-chip index closed at 9474 Friday, well above its September low of 8236.

"If those

economic numbers hold in or come in slightly above

expectations, equities might do a little better," said Kumar. On the other hand, if the U.S. dollar continues to weaken, that "might negate the positive effects of good domestic numbers," he said. After taking a weeklong breather, the U.S. dollar slipped late last week, continuing its four-month decline against the yen and euro.

Pocketbooks Take a Breather

Investors have been counting on the consumer to keep the economic recovery afloat while they wait for business spending to come around. So last week's retail sales and confidence data were worrisome. But stronger housing starts and earnings numbers might indicate those numbers were aberrations.

"The consumer has been buying a whole lot of houses, and apart from last month they've been buying a whole lot of cars," said Salomon Smith Barney economist Peter D'Antonio. "These are big-ticket items. They don't do that unless they have the wherewithal to do that," he said. "It could very well be that the May sales are just a blip. We already have chain store sales that seemed to have bounced back," he said.

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May housing starts and real earnings, a component of the consumer price index, are both released on Tuesday. Housing starts, a measure of the number of new homes on which ground was broken during the month, declined on a month-to-month basis in March and April. But economists, who think the declines were just an overcompensation for strong starts in January and February, expect a rebound in May. Consensus estimates put starts at 1.67 million for May, up from 1.56 million in April.

A consensus estimate was not available for real earnings, but D'Antonio forecasts they grew 0.1% in May, and says April's reading should be revised to a 0.4% decline. The preliminary estimate showed real earnings declining 0.7% for the month versus March, according to Bureau of Labor Statistics.

Weekly jobless claims numbers, out Thursday, will also be key to watch after a May's job's report showed the economy added fewer jobs than economists had expected. Other key data out next week include May

leading indicators and the

Philadelphia Fed Survey for June.

'Tis the Season

Second-quarter earnings preannouncement season is well under way, and with confidence in a strong corporate earnings recovery low, more big surprises will be of great interest to investors, strategists said. So far this quarter, the list of companies warning includes


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, among others.

Even so, this quarter's record is far better than it was last year, with fewer negative and more positive changes to estimates. So far this quarter, 335 companies have guided their earnings estimates down compared with 483 last year at this time.

A handful of big Wall Street brokerages report earnings next week.

Lehman Brothers


releases earnings on Tuesday,

Bear Stearns



Morgan Stanley Dean Witter


on Wednesday and

Goldman Sachs

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on Thursday.

Also on the earnings calendar, software powerhouse


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reports earnings on Tuesday.