A drop of 4 percent in crude oil prices this week could help Wall Street extend Friday's rebound, but upcoming inflation data may renew worries about the Federal Reserve's next move on interest rates.

A major U.S. economic report, the Consumer Price Index for August, will be released on Friday, along with August data on industrial production and capacity utilization.

Investors will watch those reports for clues on whether the Fed will keep rates steady at its meeting this month or resume its raising cycle. Retail data for August are also scheduled this week and could provide a better picture of back-to-school sales.

But crude oil's decline for five straight sessions last week, falling as low as $66 a barrel on Friday, could help stocks start the week on a positive note.

"The question now has to be asked ... Are we done with the days of $75-80 a barrel oil?" said Barry Hyman, equity market strategist, EKN Financial Services Inc. in New York. "This is a critical component to relieving inflationary pressures and putting money into consumer spending power."

Oil company BP Plc (BP) on Friday said it believes a key segment of its shut-down Alaskan pipeline is in good enough condition to be safely restarted.

That and data earlier last week showing ample fuel supplies helped drive U.S. crude down to its lowest since April.

At Friday's NYMEX close, October delivery crude was down $1.07 at $66.25. Its low of $66 for the day marked the cheapest since April 4.

Stocks rose on Friday after two days of losses, helped by the week-long slide in oil prices and reassuring comments from Cleveland Fed President Sandra Pianalto about inflation.

For the week, the Nasdaq ended down 1.3 percent, the Dow finished 0.6 percent lower and the S&P lost 0.9 percent. For both the Nasdaq and S&P it was the worst close in four weeks.

REMOVING UNCERTAINTY

Investors remain worried that inflation is not slowing enough while economic growth is slowing too fast, so the upcoming data could remove some of the uncertainty.

The latest sign of a housing slowdown came this week with lowered forecasts by some home builders, news that supported views the Fed might keep rates steady when it meets on Sept. 20.

On the other hand, a Labor Department report on Wednesday showed U.S. unit labor costs rose 4.9 percent in the second quarter, well above economists' median forecast, reigniting worries about inflation.

"The focus (this) week is going to be on inflation data ... Investors were spooked by the unit labor costs reported in the productivity data," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co. in Lake Oswego, Oregon.

The Fed paused last month following 17 consecutive rate increases over two years.

"The real question that faces the market is are we headed towards a hard landing or a soft landing," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York.

"What the numbers are going to tell us is what you know and I know, which is that the rate of inflation remains at a somewhat high level, but in time the rate of inflation will most likely moderate," he said.

Economists polled by Reuters forecast that core consumer prices, which exclude volatile food and energy, rose 0.2 percent in August, the same as in July.

Industrial production is expected to rise 0.2 percent in August, compared with 0.4 percent the prior month. August retail sales, expected on Thursday, are forecast to fall 0.1 percent compared with a 1.4 percent rise in July.

Consumer spending is a major part of the U.S. economy.

On Thursday, the chief executive of Wal-Mart Stores Inc. (WMT) said the retailer had strong back-to-school sales. The company has struggled with lackluster growth during the summer-long spike in gasoline prices.

Other major data on tap for the week include a preliminary September reading on consumer sentiment from the University of Michigan, also on Friday.

BROKERAGES TO REPORT

This week, brokerages including Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. will report third-quarter results.

In one sign of slower growth, analysts have been slashing their earnings forecasts for Wall Street bankers, citing a bigger-than-expected slump in stock offerings and M&A, two of the most lucrative businesses for those companies.

Other major companies scheduled to report results this week include consumer electronics retailers Best Buy Co. (BBY); Kroger Co.(KR), the largest U.S. supermarket chain; and Campbell Soup Co. (CPB). But, nearly all S&P 500 companies have reported results for the second quarter.