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New York: Should oil prices extend their pullback and data show no further deterioration in the US economy, stocks could rise this week. But investment banking results will be the wild card.
The Federal Reserve's increased discomfort with inflation will also curb investors' enthusiasm, with the May Producer Price Index (PPI) set to give the latest measure.
Major Wall Street investment banks Goldman Sachs, Lehman Brothers and Morgan Stanley are expected to post poor results this week, hampered by more writedowns and a sizable loss at Lehman.
The May PPI report, due for release on Tuesday, tops the data list, followed by May housing starts, May industrial production and a reading on the first quarter's current account. All of those numbers are on Tuesday's agenda.
Crucial data
Also crucial in setting the market's tone will be Thursday's weekly jobless claims and a survey of economic conditions in the Mid-Atlantic region by the Federal Reserve Bank of Philadelphia.
"The market's been oscillating... with each move synchronised by daily volatility in the crude oil futures market. We see that pattern continuing," said Fred Dickson, market strat-egist and director of retail research at D.A. Davidson & Co. in Lake Oswego, Oregon.
"The market will probably continue to remain inflation focused with PPI coming up. Our take is that investor reaction to the CPI was that it could have been worse." US front-month crude ended the week down 2.7 per cent.
Last week the market's performance was mixed: The Dow Jones industrial average rose 0.8 per cent, while the Standard & Poor's 500 dipped 0.1 per cent and the Nasdaq Composite Index fell 0.8 per cent.
Hot seat
On the earnings front, investment banks will command all the attention as investors seek to determine if the financial sector has seen the worst of the credit crisis.
Lehman Brothers, which this past week replaced its chief financial officer and chief operating officer, is scheduled to post second-quarter results tomorrow. It forecast a quarterly loss of roughly $2.8 billion - its first-ever loss.
Rival Goldman Sachs is scheduled to post its quarterly results on Tuesday. Morgan Stanley's earnings are due on Wednesday.
Other results on tap include those of design software maker Adobe Systems and those of FedEx.
As an economic bellwether, FedEx will be on investors' radar for anything it says about the impact of high fuel costs on its business outlook.
Even though US oil futures prices fell on Friday and ended the week lower, the July crude contract was only about $5 below its Nymex record of $139.12 set a week ago.
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