Labor, Factory Numbers Expected to Rise

Wall Street may get some relief this week, with fresh and possibly positive insights due on the health of the U.S. economy. But the market also faces head winds, with oil prices surging, the race for the White House heating up, and the government warning about possible terrorist attacks.

Signs that the economic expansion has slowed in recent months weighed on investor sentiment over the last few weeks, helping send major market indexes toward their lowest levels of the year.

The rebound in stocks late last week, however, gave investors hope that the market was finding its footing. This week, reports on the labor market and the manufacturing sector may offer some reassurance that the economic deceleration was only temporary.

Last month Federal Reserve Chairman Alan Greenspan offered an optimistic view of the economy, saying that the strong pace of growth is sustainable this year and the next, with little risk of inflation.

But Friday the government said gross domestic product rose at a real annualized rate of 3% in the second quarter, down from 4.5% in the first quarter.

“The real questions that face the market are: Is Alan Greenspan right? Was [weakness in] June transitory? And will the economy start to improve in the third quarter?” said Hugh Johnson, chief investment officer at First Albany Corp.

Wall Street will get some help answering those questions today, when the Institute for Supply Management issues its monthly report on the U.S. manufacturing sector. The survey’s index is expected to show a slight rise in July to 62 from 61.1 in June.

But the week’s main economic event happens Friday, when the government issues payroll data for July. Economists polled by Reuters are expecting the report to show that the economy created about 228,000 jobs last month, following a gain of about 112,000 in June. The unemployment rate is expected to remain steady at 5.6%.

One of Wall Street’s big worries has been that a slowdown in employment growth could prompt consumers, faced with potential joblessness, to curb their spending -- a force that powers about two-thirds of U.S. growth.

“That’s going to go to the heart of what people think about how the economy’s doing,” said Henry Herrmann, chief investment officer at Waddell & Reed. “If we get a strong payroll number, people will be a little more confident about the consumer hanging in there, and we might get some more optimistic adjustments to people’s thinking.”

Meanwhile, second-quarter earnings reporting season is drawing to a close. About 80% of the companies in the S&P; 500 already have reported their results, and operating earnings for those firms were up 27.9% from a year earlier.

Relief that the earnings season is nearly over and that the Democratic National Convention has gone by without a major hitch could give stocks a boost in the next few days, said Edgar Peters, chief investment officer at PanAgora Asset Management.

“The market is oversold right now,” Peters said. “It’s about as undervalued as it was a year ago last March, and we had a significant rise after that.”

Still, uncertainty over a number of issues, including the latest terrorism warning, the presidential election and skyrocketing oil prices, could easily limit any market gains, analysts said.

Near-term oil futures in New York rose $1.05 to $43.80 a barrel Friday, the highest in the two decades that oil futures have been trading.

Analysts said the oil market continues to worry about possible supply interruptions from Russia and the Middle East, even though the Organization of the Petroleum Exporting Countries has pledged to boost production this month.

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This Week’s Datebook

Today

* Commerce Department reports on construction spending for June.

* Institute for Supply Management issues its monthly report on the manufacturing sector.

* Procter & Gamble Co. releases fourth-quarter earnings.

* Second-quarter earnings are released by Priceline.com Inc., R.J. Reynolds Tobacco Holdings Inc. and Unocal Corp.

Tuesday

* Commerce Department reports on personal income and spending for June.

* Automakers release sales figures for July.

* Fourth-quarter earnings released by Coach Inc. and Meredith Corp.

* Third-quarter earnings released by Emerson Electric Co. and Tyco International Ltd.

* Second-quarter earnings released by IAC/InterActiveCorp, Martha Stewart Living Omnimedia Inc., Perot Systems Corp., Prudential Financial Inc., Qwest Communications International Inc., Tenet Healthcare Corp. and Wild Oats Markets Inc.

Wednesday

* Commerce Department reports on factory orders for June.

* Second-quarter earnings released by Aon Corp., Orbitz Inc., R.R. Donnelley & Sons Co., CVS Corp., Cigna Corp., Reliant Energy Inc., Univision Communications Inc.

* First-quarter earnings released by Polo Ralph Lauren Corp. and Tommy Hilfiger Corp.

Thursday

* Nation’s largest retailers release sales figures for July.

* Labor Department reports on weekly jobless claims.

* Clorox Co. and Sara Lee Corp. release fourth-quarter earnings.

* Second-quarter earnings released by Goodyear Tire & Rubber Co., Chiquita Brands International Inc., Alcan Inc., CMS Energy Corp., DirectTV Group Inc., Gemstar-TV Guide International Inc., Keyspan Corp., King Pharmaceuticals Inc., May Department Stores Co., MCI Inc., Pixar Animation Studios, Sempra Energy and Williams Cos.

Friday

* Labor Department reports on employment for July.

* Federal Reserve reports on consumer credit for June.