Stocks to Focus on Oil Prices, Consumer Data

Stocks will follow the lead of consumers next week when traders look at economic reports for hints on whether rising oil prices have started to crimp spending on other goods.

Consumer confidence data will take the spotlight early next week along with a government report on durable goods orders. These reports will take the lead in a parade of economic data next week, analysts said.

Ministers from the Organization of Petroleum Exporting Countries (search) have an informal meeting scheduled for the weekend, which also will be closely watched for clues on where oil prices might go.

"There is a whole slew of important economic numbers and the big focus of the week will be the results of the OPEC meeting and what happens with oil prices," said Peter Cardillo, chief market analyst and chief strategist at SW Bach & Co.

"If things go well with OPEC and they manage to depress oil prices a bit from these levels, then the market could respond to good economic numbers," Cardillo said. "We could see the market work itself out of its malaise and worries of inflation."

In New York, crude oil futures ended below $40 on Friday for the first time in 10 trading days after Saudi Arabia, the world's largest oil producer, proposed that OPEC increase production by more than 2 million barrels a day. The drop in price eased worries that soaring energy costs could derail the recovering U.S. economy.

The July crude futures contract fell 87 cents on Friday to settle at $39.93 a barrel, the lowest closing price since May 10 on the New York Mercantile Exchange (search). Prices are down from Monday when oil peaked at $41.85, the highest price since the NYMEX launched the oil futures contract 21 years ago.

Rising oil prices have been weighing on the market all week and will continue to be a factor, analysts say.

"The key issue is .. how much of the higher oil prices will leak into the broader price measures," said Jack Caffrey, equity strategist at JP Morgan Private Bank.

"Does it start giving broader signals of higher prices throughout the economy? Coupled with that, does higher oil result in higher gasoline? So far, that's been the case. And does higher gasoline cause a reallocation of consumer spending toward gasoline and away from more discretionary purchases?"

Stocks rose Friday, after Saudi Arabia's call for higher oil production drove oil prices down. But Friday's gains were not enough to keep blue chips from notching their fourth week of losses.

The Dow ended the week down 0.46 percent, while the S&P 500 dropped 0.19 percent for the week. The Nasdaq, however, broke its three-week losing streak, finishing up 0.41 percent.

Next week, the Conference Board (search) will post its index of May consumer confidence Tuesday. Wednesday the Commerce Department (search) will post its report on April orders for long-lasting durable goods, such as washing machines, cars and other items meant to last three years or more.

April data on existing home sales is due Tuesday, followed by new home sales Wednesday.

The Commerce Department puts out its preliminary first-quarter Gross Domestic Product (search) number Thursday.

Friday, three closely watched reports will come out: the National Association of Purchasing Management-New York releases its May index of manufacturing activity; the University of Michigan gives its final May consumer sentiment reading, and the Chicago Purchasing Managers Index for May comes out.

The data may give hints about the state of the U.S. economy and what traders can expect when the Federal Reserve (search) meets in late June to set its interest-rate policy. Investors are expecting the Fed to raise rates, an expectation that has weighed on the market in recent weeks.

Earnings will slow to just a trickle next week, as most companies have already posted their quarterly earnings. But a few major reports are on the horizon.

On Monday, Campbell Soup Co. (CPB), the iconic American soup maker, and Medtronic Inc. (MDT), the world's largest medical device maker, are set to report their quarterly profits. Software maker Computer Associates International Inc.(CA) , which is facing federal probes into its accounting, and ketchup maker H.J. Heinz Co. (HNZ) are due to post their results on Tuesday.

"Most of the big companies are done with earnings and we have kind of a quiet period now for a while," said Michael Vogelzang, president of Boston Advisors Inc. "All eyes are on the June Fed meeting and I'm not sure what's going to shake us one way or the other."

In the coming week, Vogelzang thinks the stock market will be "flat with fairly high volatility.

"We're in a period with a lot of uncertainty," he said. "Risks are fairly high here for a particularly nasty surprise somewhere along the line, whether it's the Fed raising 50 basis points or a significant downturn in the geopolitical situation."