In the news released today, the level of durable goods orders rose more than expected last month and a couple of key subcategories (ex-transportation, ex-defense capital goods minus aircraft) also showed unexpected strength.

The pace of new home sales slipped slightly in June but the rates of the preceding three months were revised higher. And a jump in the final Consumer Sentiment Index for the month surprised observers. The final reading was the highest in three months and the increase from June was the largest in a year.

The price of a barrel of light, sweet crude for September delivery fell by $2.23 on the New York Mercantile Exchange to settle at $123.26. This was the seventh decline in the last nine sessions and today's close was the lowest for a front-month contract since June 4. The record high was July 3rd's $145.29.

By the end of stock trading, the Dow had gained just 0.19% and the S&P 500 rose by 0.42%. The Nasdaq outperformed with a gain of 1.33%. The Nasdaq also outperformed for the week with a gain of 1.22%. The S&P 500 declined by 0.23% and the Dow fell by 1.09%.

Despite today's sizeable sell-off in the bond market, the yield of the benchmark 10-Year Note gained just 2 basis points on the week (yield moves inversely to price).

Next week's economic calendar is back-weighted. There are no major releases slated for Monday and only one on Tuesday. This is the Consumer Confidence Index for this month from the Conference Board, an independent research firm. The index came in at a sixteen-year low of 50.4 in June following a reading of 58.1 in May.

The index of consumers' assessments of current conditions fell to 64.5 from May's 74.2 and was the fifth lowest on record. The expectations index fell from 47.3 to 41.0, the lowest reading in the data series going back forty-four years.

Rising gasoline prices, payroll contractions, and falling property values are contributing to the deterioration of consumer optimism. Though gas prices have eased slightly in the last week, analysts still feel that the overall index declined again this month to about 50.0.

The only releases slated for Wednesday are the weekly reports on oil inventories and mortgage application activity, and the report from employment services firm, Automated Data Processing, on private payroll data for July. The oil inventories report may show a decline in crude supplies since production in the Gulf of Mexico was slowed this week by Hurricane Dolly. The mortgage application index has been trending down and only an unusually large move would make much of an impact on the markets.

The ADP employment report could create some interest since it comes just two days before the monthly report from the Labor Department. But the ADP data has not been a good indicator of what the Labor Departments figures will show. Both said non-government payrolls fell in June. The ADP report said they fell by 79,000 and the Labor Department said by 91,000. But the decline in the ADP report was the first in four months while the Labor Department has reported declines in each of its last seven reports.

Thursday has a heavy schedule of economic releases. The employment situation will be addressed once again in the report on jobless claims. In yesterday's report, the Labor Department said the seasonally adjusted levels of initial claims for state unemployment benefits rose last week by 34,000 to 406,000. The report also said that the previous week's originally reported level of 366,000 was revised up by 6,000 to 372,000 -- a jump of 24,000 from the week before.

But the combined increase of 58,000 in the last two week's followed a decline of 56,000 in the week ending July 5 and that plunge seems to have been distorted by a faulty seasonal adjustment factor to account for the closure of state labor offices on Independence Day. The four-week moving average, which smoothes out some of the short-term volatility, rose by just 4,500 to 382,500.

Regardless of the explanation for the recent volatility, the level is still high by recent historical standards. The latest reading matches that in late March as the highest since September of 2003. For the year-to-date (twenty-nine weeks), the average weekly reading has been 364,069. For the same period last year, the average was 314,759.

Yesterday's report said that continuing claims in the week ending July 12 (continuing claims must be at least a week old) fell by 9,000 to 3.107 million. The four-week moving average fell by 7,000 to 3,134,250. Despite the latest declines, the level remains high. For the first twenty-eight weeks of the year, the average reading has been 2,947,536. For the same period last year, the average was 2,512,536.

Forecasters are calling for a decline in this week's inital claims figure.

Thursday also brings the first official calculation of gross domestic product for the second quarter. GDP is the market value of all final goods and services produced by labor or property in the country in a year?s time. Quarterly data is adjusted and annualized and changes from quarter to quarter indicate the direction of the economy and how energetically it is expanding or contracting.

Despite persistent rumors of a recession, the first quarter GDP showed a 0.6% expansion in April's initial or advance report, a 0.9% increase in May's first revision or preliminary report, and a 1.0% rise in June's final report. It grew by 0.6% in the fourth quarter of 2007.

Recent estimates of second quarter growth have clustered around 2.0% and some forecasters are even calling for an increase nearer to 3.0%. If the figure released on Thursday comes in strong, it is likely to spur a stock rally and weaken bonds.

The inflation data contained in the GDP report will also be closely watched. The GDP price index rose by 2.7% in the first quarter, the largest jump since the first quarter of 2007. A rise of 2.8% is predicted for the second quarter.

Another inflation indicator comes out on Thursday but it is expected to be relatively tame. This is the Employment Cost Index (ECI), a measure of the seasonally adjusted level of compensation costs for all civilian workers. The index is a more comprehensive gauge of labor costs than the wage data contained in the monthly employment reports because it also incorporates salaries and employer costs for non-cash employee benefits.

The Commerce Department said that the ECI for the first quarter rose by 0.7%. This was a deceleration from an 8.0% increase in the fourth quarter of last year. In fact, it was the smallest increase in two years. Another 0.7% rise is predicted for the second quarter.

Also slated for release on Thursday is the index on manufacturing activity in the highly-industrialized Chicago region. Last month, the Chicago branch of the National Association of Purchasing Management (now known nationally as the Institute for Supply Management or ISM) said that its Purchasing Managers' Index (PMI) came in at 49.6. Any reading below 50.0 reflects a general contraction of activity relative to the previous month. June's reading was stronger than the 48.5 that forecasters had predicted and stronger than the 49.1 posted in April, but it was still a fifth consecutive contraction indicator.

July's index is not expected to differ greatly from June's.

Friday contains a couple of heavyweight indicators. First up is the highly-influential employment report. In the last one, the Labor Department said that the seasonally adjusted level of nonfarm payrolls fell by 62,000 in June and May's originally reported decline of 49,000 was revised to a decline of 62,000. In addition, April's previously reported decline of 28,000 was revised to a drop of 67,000.

The report said that the unemployment rate, the portion of the workforce without jobs, remained at 5.5% in June instead of easing back somewhat as analysts had predicted. The jump in May to 5.5% from April's 5.0% was the largest in twenty-two years and the level in May and June were the highest since October of 2004.

The inflation news in June's employment report was benign. Average hourly earnings rose in June by 0.3%, in-line with the average of the last several years.

For July, the payroll figure is expected to have fallen by about 70,000. The unemployment rate is expected to have edged up to 5.6%, the highest since June of 2004.

Another major economic indicator due out Friday is the ISM Manufacturing Index, a gauge of the national sector's health. In June, the index came in at 50.2. Like the Chicago PMI, any reading over 50.0 reflects expansion for the month. Though June's reading was only slightly positive, it was the first since January's barely stronger reading of 50.7. Another near-neutral reading is expected for July.

The last economic news release for the week is the report on construction spending for June. In the last report, the Commerce Department said the seasonally adjusted, annualized level of spending fell in May by 0.4%. April's originally reported decline of 0.4% was revised to a slip of just 0.1% and March's previously reported decline of 0.6% was revised to a gain of 1.4%.

But the Commerce Department had previously announced that the last report would reflect adjustments to federal construction expenditures according to new seasonal factors and the data series would be revised going back to 1996.

In addition, the announcement said the data would not include residential improvements on rental, vacant, and seasonal properties. Improvements to owner-occupied structures were still included. Past data was revised going back to the beginning of 1993.

Despite the revisions, the data still reflected an ongoing slump in the residential sector. The pace fell in May by 1.6%, matching the decline in April. The monthly drop was the fourteenth in a row and the level was the lowest since January of 2002.

There is no reason to expect a pickup in the residential sector and forecasters are predicting a decline of about 0.3% in overall construction spending.

10:30 AM EDT : The economic news of the day was stronger than expected and oil futures are falling once again. These developments have lent support to stocks and the indices are up after a sharp decline yesterday. Treasuries, which rallied yesterday, are down this morning.

In today's news, the Commerce Department reported that the seasonally adjusted level of durable goods orders rose last month by 0.8% following a 0.1% increase in May (previously reported as 0.0%). The expansion surprised forecasters who were looking for little change in the orders level.

Durable goods are defined as items meant to last three years or more. They are usually labor-intensive to produce, expensive, and therefore often financed. Because of this, the trend in orders provides some insight regarding upcoming production activity and the effect interest rates may be having on the process.

A particularly volatile category is transportation and the orders level there fell by 2.6% due to a decline in commercial aircraft of 25.1%. Excluding transportation, orders were up by 2.0%, the strongest increase in six months.

Observers also look at the orders level excluding the defense sector since defense orders are not governed by standard market forces. While the order level in the defense sector rose by 12.0% last month, ex-defense orders rose by just 0.1%. Though small, the advance was the first in three months.

Another closely watched category is that of nondefense capital goods minus aircraft, seen as a gauge of core business demand. The order level there rose by 1.4% following a 0.1% decline in May.

In a separate report, the Commerce Department said that the seasonally adjusted, annualized pace of new home sales fell by 0.6% last month to 530,000. Despite the decline, May's originally reported pace of 512,000 was revised up to 533,000, April's previously reported 525,000 was revised up to 542,000, and March's 501,000 was revised up to 513,000.

The report said that the pace rose by 5.3% in the Northeast and by 2.5% in the Midwest. But in the two largest contributing regions, the rate fell. The South saw a decline of 2.0% and the West saw one of 0.9%.

With new home construction declining, the inventory of homes on the market fell by 5.3% to a seasonally adjusted, annualized level of 426,000. This was a fourteenth consecutive monthly contraction. But since the sales pace picked up, the inventory level represented 10.0 month's of sales, down from a 10.4 month turnover time in May.

The average new home price declined by just $300 to $298,000 but this was 2.6% lower than what it was a year earlier. The median price rose by $3,200 to $230,900 but was 2.0% down on a year-over-year basis.

And the final index reading on consumer sentiment for July from the University of Michigan's twice-monthly surveys came in at 61.2. This was a surprising jump from the preliminary read of 54.6 and June's final reading of 54.4 (the lowest since 1980). Forecasters were not looking for much change in the final index.

Also reported was an increase in the expectations index to 53.5 from the preliminary 48.3 and June's final 49.2. The index of current conditions rose to 73.1 from the preliminary 69.5 and June's 67.6.

The bullish news suggests that the economy is not doing as badly as feared and this has helped stocks this morning. Also helping is a decline in oil. The September contract for crude oil was recently trading at $123.75 per barrel, down by $1.74 from yesterday's closing price . . . .

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