Everyone will be watching the Federal Reserve next week, trying to read the tea leaves to determine how Fed policy makers will respond to the recent spate of lousy economic news.
The Federal Open Market Committee will meet on Tuesday and Wednesday, to be followed by the release of formal announcements of Fed positions and a press conference by Chairman Ben Bernanke.
Bernankes press conference on Wednesday afternoon will be his second and part of the Feds new policy of seeking to explain its decisions to an often nonplussed American public.
Bernankes first press conference in April was well received.
No one expects any significant changes in Fed monetary policy. Interest rates will almost certainly remain at a range of 0% to 0.25%, where theyve been for two and a half years, and there will be no expansion of the quantitative easing program scheduled to end in June.
But, as has been the case for months now, investors will be closely parsing Fed language for any indication that fiscal policy could be shifting down the road.
Earlier this year the thought was that the Fed would be tightening fiscal policy as the economic recovery took hold. But that sentiment has changed in the past few weeks as one economic report after another has indicated that a real recovery may be some ways off.
Housing data due next week is likely to receive most of the attention in an otherwise sparse week for economic reports.
A report on May sales of existing homes is due Tuesday, and one for new single-family houses on Thursday. Home sales have been at a virtual standstill for months as potential buyers sit on the sidelines waiting for prices to fall even further.
The FHFA House Price Index for April is due Wednesday. Late last month, a widely watched housing index showed home values have fallen in 20 large markets. That trend isnt expected to end any time soon.
The Richmond Feds Survey of Manufacturing for June is due Tuesday and follows two disappointing reports from the New York and Philadelphia regions. The New York and Philadelphia reports were especially troubling because manufacturing had been one of the lone bright spots on an otherwise bleak economic landscape.
In fact, the lousy manufacturing numbers out of the Northeast paired with higher inflation numbers led some to raise the specter of stagflation, a dreaded economic condition in which prices go higher but economic growth is stagnant.
An advance report on durable goods orders for May is due Friday, as is the release of the third estimate of first-quarter GDP.