Investors examine the same key economic reports at the start of every month -- on manufacturing, the service sector and employment. This week, they'll be looking at these indicators for inflation clues as much as they will for insight into economic growth.
Inflationary pressures have overtaken recession as Wall Street's primary concern, at least for now.
The market has been mercurial lately, convinced that it has a lot to worry about but not completely sure what to worry about most. There are so many choices: the ever-sinking housing market, the still-strained debt markets and ongoing deterioration in consumer credit.
But what has appeared in recent weeks to be the most tangible, widespread risk to consumer spending -- and therefore the economy and corporate profits -- is the high price of food and energy. Just months ago, the market was monitoring every tick in interest rate spreads. Now it's all about light, sweet crude.
"The biggest story continues to be oil," said Michael Sheldon, chief market strategist at RDM Financial Group in Westport, Conn.
It is true that oil has been rising for many years now, he said, "but over the past few years, there was positive employment growth, rising asset prices, positive real wage growth. In the current environment, those tail winds are missing -- as a result, oil prices are a bigger and growing worry for consumers and the economy."
With that in mind, economic readings take on an additional role; nearly every one has some measure of inflation that will be more closely watched than usual. The Institute for Supply Management's manufacturing and service sector reports include price indexes, and the Labor Department's employment report reveals unit labor costs.
To be sure, this week's reports will still be read for hints about where the economy is headed. The institute's manufacturing report is expected to indicate another small contraction for May, and its service sector report is expected to post very tame expansion. The employment report is expected to show the fifth consecutive month of U.S. job losses and an uptick in the unemployment rate to 5.1%.
There's little chance that investors will be rid of their inflation worries any time soon. A pullback in oil could provide a boost to stocks, but investors' jitters are not likely to let up until Wall Street sees a prolonged energy price decline.
