Consumption, Jobs Focus of Coming Week

NEW YORK (TheStreet) -- After getting news that U.S. economic growth slowed to a 2.4% pace in the second quarter, investors will be looking forward to the coming week's broad mix of earnings and macroeconomic releases for a better sense of where the economy is headed.

In addition to key reports on construction, consumer spending and the labor market, investors also will have a fresh batch of quarterly results to sift through from the key housing, consumer and shipping sectors.

"The GDP number was just a shade lower than consensus estimates and certainly wasn't earth-shattering news since markets were certainly anticipating slower growth," said Peter Cardillo, chief market economist at Avalon Partners, who had been looking for growth of 2.7%.

The consensus estimate had been for GDP growth of 2.5%, according to Briefing.com. Markets struggled to shrug off weakness immediately following the report, as stronger-than-expected readings on July consumer sentiment and Chicago-area manufacturing activity helped pare earlier losses.

"The slowdown in exports and extremely modest consumer spending were highlighted in the decline, but the number was not a major shock," Cardillo said. "It's certainly still above levels that indicate that the possibility of a double-dip recession is not in the cards."

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Still, the report will likely make markets pretty volatile next week, particularly in the wake of St. Louis Federal Reserve Bank President James Bullard's indications that additional stimulus measures will be needed to aid the recovery, said Marc Scudillo, managing officer of Amper Wealth Management and Corporate Benefits.

"On the one hand, Bullard's comments are good news because they show that the Fed is prepared to take action, but on the other hand, it shows that we're not out of the woods yet," he said.

That means investors will be paying particularly close attention to the coming week's data menu.

On Monday, the Department of Commerce releases its June construction spending report, which is expected to show a drop of 1%, after May's milder decline of 0.2%. July manufacturing activity is also projected to weaken on Monday with the Institute of Supply Management's index estimated to show a reading of 53.5 for the month, compared with June's level of 56.2.

Tuesday brings June personal income and spending reports from the Department of Commerce, which are slated to demonstrate milder growth of 0.2% and 0.1%, respectively, after May's increases of 0.4% and 0.2%. July auto sales, meanwhile, will give a sense of consumers' willingness to spend on big-ticket items. Economists anticipate sales of 3.9 million, rising from 3.7 million in June. The Department of Commerce will also issue June factory order data during the session. Wall Street is looking for mild growth after orders fell 1.4% in June.

Wednesday kicks off with the first of a series of July jobs data, as the ADP employment report offers a look at private sector job growth. Economists are looking for 30,000 jobs to be added to private sector payrolls, after growth of 13,000 in June, according to Briefing.com. The services sector will also come into focus as the ISM's services index is expected to show a July reading of 53.2, compared with 53.8, previously.

By the end of the week, the labor market will dominate the spotlight. The Labor Department will give its weekly read on initial weekly jobless claims on Thursday before its much-anticipated July employment report on Friday. Economists expect the economy lost 116,000 nonfarm payrolls in the month, representing a milder decline that June's drop of 125,000, according to Briefing.com. The unemployment rate, meanwhile, is slated to rise to 9.6% from 9.5% previously.

"If you really look at the job market, the bad news is that unemployment remains high, but the good news is that the private sector has been adding jobs on a monthly basis. I think that's what investors are focused on," said Cardillo of Avalon Partners.

Earnings reports will likely take a backseat to macroeconomic releases in the coming week, but ongoing concerns about consumption ensure that they won't go unnoticed, said Scudillo of Amper Wealth Management and Corporate Benefits.

"Investors are watching earnings to see where profits are coming from," he said. "Are earnings actually coming from consumers or from cost-cutting? Is demand growth domestic or international?"

Next week brings results from key consumer staples companies such as Procter & Gamble ( PG) on Tuesday and Church & Dwight ( CHD) and Kraft Foods ( KFT) on Thursday. P&G is expected to report earnings of 73 cents a share while Church &D wight and Kraft are projected to post earnings of 95 cents a share and 52 cents a share, respectively.

MasterCard ( MA) releases its second-quarter earnings report on Tuesday morning, when investors will be looking for a profit of $3.33 a share.

Health care heavyweights Humana ( HUM) and Cigna ( CI) report on Monday and Thursday, respectively. Homebuilders' reports will be scattered through the week beginning with D.R. Horton ( DHI) on Tuesday, PulteGroup ( PHM) on Wednesday and Beazer Homes USA ( BZH) on Thursday.

Oilfield service companies Baker Hughes ( BHI) and Smith International ( SII) report on Tuesday, and Diana Shipping ( DSX) and Eagle Bulk Shipping ( EGLE) are scheduled midweek.

-- Written by Melinda Peer in New York.

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