Coming Week: Fireworks Show

Although the coming week is a holiday-shortened one, the economic calendar will be busy with data that should give traders and, more importantly, the Fed, a clearer picture on the state of the economy.

While the markets will be on a break early in the week due to Independence Day, the real fireworks could come Friday, with the release of June employment figures.

"The significance of next week's data could be huge ahead of both Bernanke's semiannual monetary policy report to Congress on July 19 and the next FOMC meeting in early August," says Randy Diamond, sales trader at Miller Tabak.

On Monday, the markets will close at 1 p.m. EDT ahead of the July 4 holiday. But before then, construction spending figures for May and the June ISM index are set to hit the tape.

According to Thomson First Call, analysts expect construction spending to show a rise of 0.2%, a turnaround from April's drop of 0.1%.

When it comes to the ISM index, a data point the Fed watches closely, economists will be looking for a reading of 55, up from 54.4 in May.

Also in the spotlight Monday will be the beleaguered Big Three -- General Motors ( GM), Ford ( F) and DaimlerChrysler ( DCX) -- as they release their June auto sales numbers. GM, which rose nearly 9% Friday on word of a potential partnership with Renault and Nissan, already cautioned last week that sales will be down sharply from a year ago, when results were boosted by incentives.

It's also worth noting that Japan will release its Tankan survey Monday (Sunday in the U.S.), which will have great bearing on whether the Bank of Japan raises interest rates on July 14.

The markets will be closed on Tuesday for Independence Day. The action gets under way again Wednesday with another look at the auto sector, with the release of overall industry car and truck sales for June. Economists predict that industry car sales for the month totaled 5.4 million units, up from 5.3 million in May. Trucks sales are expected to rise to 7.2 million vehicles from 7 million the prior month.

"It is well known that inventory levels have been increasing in the automotive sector, and that's a fact that could weigh upon factory activity in the upcoming quarter," says Diamond.

Speaking of factory activity, economists anticipate factory orders for May, also set for release on Wednesday, will be flat. Still, that's an improvement from April's decline of 1.8%.

The ISM Services index for June will arrive on Thursday. Economists are predicting a reading of 59, down from 60.1 in May. In addition, retailers will be reporting their June sales figures, giving some insight into shoppers' habits and the state of consumer spending.

Friday's employment data likely will steal the spotlight from all the other numbers released in the week.

Economists are expecting the addition of 168,000 jobs, more than double the 75,000 created in May. The unemployment rate is expected to remain at 4.6%, and the average workweek is projected to be 33.8 hours, which is also the same as the previous month. Hourly earnings, however, are expected to rise 0.3%, after 0.1% growth in May.

"The jobs number has serious implications about the strength of the economy and therefore will weigh heavily on the Fed's interest rate decision in August," says Phillip Newhart, economist at Wachovia. Newhart's forecast is for 156,000 jobs to be added.

The earnings schedule is light in the coming week. The second quarter ended Friday, and earnings reports for the period won't kick off until July 10, when Alcoa ( AA) releases its results.

Until then, Thursday will be the biggest day for earnings reports, with the likes of Acuity Brands ( AYI), America's Car-Mart ( CRMT) and Delta & Pine Land ( DLP) posting results.

International Speedway ( ISCA) is slated to report earnings on Thursday as well. Analysts expect the company to post a profit of 57 cents a share, up from 48 cents last year, on $170.2 million in revenue.

Markets and motorsports, a fitting way to say happy birthday to America!

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