Any indication this week that inflation may be cooling off would provide the fuel needed for a long-awaited pickup in US stocks as the corporate earnings season comes to a close, market strategists said. The US Labour Department will release reports on producer and consumer prices on successive days in the coming week. Investors will scour the numbers for signs of a let-up in recent inflationary pressures. That could signal the Federal Reserve might ease up on its campaign to raise interest rates and relieve the concern that has hung over stocks for much of the year.
This week also will feature the final vestiges of the earnings season, with headline figures from major retailers, including Home Depot Inc and J.C. Penney Co Inc and top technology names like Hewlett-Packard Co and Applied Materials Inc.
The Producer Price Index report is expected to show a 0.4 percent rise for April, according to economists polled by Reuters. Factoring out volatile food and energy prices, the core PPI for April is forecast to gain 0.2 percent. The PPI report is set for release on Tuesday.
The Consumer Price Index is forecast to gain 0.4 percent overall, while the core CPI without food and fuel prices is expected to rise 0.2 percent, according to the Reuters poll. The CPI report is scheduled for release on Wednesday.
Those numbers suggest a slower rate of price increases than the 0.7 percent gain in March of the overall PPI and the 0.6 percent increase in March in the overall CPI.
Since last June, the Fed has raised short-term interest rates eight times to stave off inflationary pressures.
Other significant news on the economic calendar includes housing starts on Tuesday and leading indicators Thursday.
For the week, the blue-chip Dow Jones industrial average ended down 2 percent and the broad Standard & Poor's 500 Index fell 1.5 percent. Both broke three-week winning streaks. But the tech-driven Nasdaq Composite Index rose 0.5 percent for the week.
So far this year, the Dow is down 6 percent, the Nasdaq is down 9 percent, and the S&P 500 is down nearly 5 percent.
One factor easing the pressures on pricing is the recent falloff in US oil prices, which dropped below $49 a barrel this week after hitting a record at $58.28 on April 4.
Strategists said much of the forecast increase in wholesale and retail prices would be the result of the runup in the cost of oil and other commodities over the past year.
Home Depot is expected to post a 12 percent rise in first-quarter earnings per share, on 9.9 percent revenue growth, according to Reuters Estimates. The huge home improvements retailer, whose stock is among the 30 in the Dow average, will report results on Tuesday.
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