Inflation, jobs, manufacturing data expected to push low-volume stock market around

Seasonal light volume is expected to make for a volatile week as a wealth of economic data is released regarding inflation, jobs and manufacturing following the Kansas City Federal Reserve's central-banker conference in Jackson Hole, Wyo.

Stocks finished higher on the week Friday, snapping a losing streak, as the Dow Jones Industrial Average gained 0.6% for the week, the S&P 500 index advanced 0.7% and the Nasdaq Composite Index finished up 0.8%.

At Jackson Hole on Friday, European Central Bank President Mario Draghi warned that trade protectionism posed a serious risk to the global economy, while Fed Chairwoman Janet Yellen defended financial regulations put into effect during the Obama administration, which have been criticized by President Trump and congressional Republicans.

Moving into the week, expect low trading volume to remain at below-average levels, allowing relatively small moves to shake up markets.

"I don't see volume improving, but volatility will pick up heading into Labor Day with a big economic calendar," said Robert Pavlik, chief market strategist at Boston Private Wealth, in an interview.

Pavlik noted that the second-quarter GDP reading on Wednesday, July inflation data on Thursday, and August jobs data on Friday will be of particular interest. Analysts surveyed by MarketWatch expect a GDP reading of 2.8%, inflation to increase by 0.1%, and a rise of 209,000 jobs for August.

Total composite trading volume on Friday finished at the second lightest session of the year at 4.81 billion shares traded, well under the August average of 5.88 billion shares, according to Dow Jones data.

Similarly, trading on the New York Stock Exchange finished at 2.57 billion shares, it's second lightest session of the year, well below the August average of 3.09 billion. Trading on the Nasdaq was at its third lightest volume of the year at 1.42 billion shares, below the August average of 1.79 billion.

However, the CBOE Volatility Index is still relatively low, finishing under 12 on Friday. Rather, volatility has expressed itself in the choppiness of markets during the period of low volume.

Pavlik said investors are sensitive to the S&P 500 dropping below its 50-day moving average and wondering if it has the potential to push higher.

"From a market perspective you want to see that move above the 50 and hold it," Pavlik said.

Other data coming out include August consumer confidence figures on Tuesday; August ADP jobs figures on Wednesday; July consumer spending and the August Chicago PMI on Thursday; and August Institute for Supply Management manufacturing data and August consumer sentiment data on Friday.

Before the data-heavy week gets under way, however, investors will be looking at the effect of Category 3 Hurricane Harvey as it moves up the Gulf of Mexico.

The fallout from Hurricane Harvey will probably have the most impact on markets heading into the week, said Jamie Cox, managing partner at Harris Financial Group, in an interview. That effect, however, will be temporary, as economic data coming out over the week is expected to confirm that the economy is still strong despite a few weak patches, he said.

"Car sales are a problem," said Cox. "We're not quite there yet, but we're running into a recessionary period for autos." U.S. auto sales data are scheduled for release on Friday.

Plus, going forward, Cox said it doesn't matter how strong economic data is over the coming week if lawmakers fail to raise the debt ceiling in mid-September.

"The market's still treading gingerly over the debt ceiling debate," Cox said. "If there's fighting over the debt ceiling then all next week's data becomes irrelevant."

Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell, and House Speaker Paul Ryan have all said that they are confident the debt ceiling will be raised in September.

(Reporting by Wallace Witkowski)