Tom Hanna's Lifestream

The coming week promises plenty of volatility with what's likely to be a mixed bag of economic news that's sure to rattle markets. After a solid run that brought the market up more than 15% in a month, that volatility is likely to trend to the downside. With the Fed finally starting to make noise last week about the looming possibility of inflation, and plans to respond to it, there's danger that any signs of inflation could be taken very negatively by a weak market addicted to cheap money. The Consumer Price Index (Wednesday) and Producer Price Index (Tuesday) numbers due out this week are unlikely to show much inflation as a strong dollar has kept import prices in check and weak consumer demand has led retailers to deep discounts. The capacity utilization figures in the industrial production report (Wednesday) will be another positive for inflation, as cap utilization continues well below the long run average, easing inflationary pressure at the manufacturing stage. Where inflation is likely to come into play is in the Wednesday afternoon release of the Beige Book by the Federal Reserve and in late week speeches by Fed officials including a Friday speech by Chairman Bernanke. Mentions of inflation pressures in those venues combined with a strong retail sales report (Tuesday) could unnerve markets. Markets may also be shaken a bit on Tuesday if retail sales don't hold up to the strong growth seen in January and February. Even a slight month-to-month drop in retail sales would still leave the picture substantially improved over the second half of 2008, but the market will likely react poorly. If we get a third straight solid retail sales report, look for a strong rally with the note that it could lead to that inflation fear backlash later in the week. On the housing front, the big numbers this week are the homebuilders sentiment survey and the parallel housing starts. Both have been terribly weak, leaving plenty of room for improvement, but the year-over-year housing starts are still almost certain to be strongly negative. With homebuilder consolidation helping to put legs under last week's market, weakness in these reports could erode some of those gains.

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Indicators

Spanish Leading Indicators from the Conference Board

Producer Price Index from the Bureau of Labor Statistics Retail Sales from the Commerce Department Weekly Redbook Retail Index

Consumer Price Index from the Bureau of Labor Statistics Empire State Manufacturing Index from the New York Federal Reserve Industrial Production from the Federal Reserve Board Housing Market Index from the National Association of Homebuilders and Wells Fargo Beige Book from the Federal Reserve Weekly Mortgage Applications Survey from the Mortgage Bankers Association Weekly Petroleum Inventory Report and This Week in Petroleum from the Energy Information Administration

Housing Starts from the Commerce Department Weekly Jobless Claims report from the Employment and Training Administration Weekly Money Supply (M1 and M2) from the Federal Reserve Weekly Natural Gas Report from the Energy Information Administration

Consumer Sentiment from the University of Michigan Consumer Survey Center

Treasury Auctions and Announcements

11 AM: 4-Week T-Bill Announcement 1 PM: 3-Month and 6- Month T-Bill Auctions

1 PM: 4-Week T-Bill Auction

11 AM: 3-Month and 6-Month T-Bill Announcements

*See more information on the Financial Roadmap series here. Earnings reports are companies of interest, NOT recommendations.

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