Housing and consumer data may buoy stocks

By Cal Mankowski

NEW YORK (Reuters) - New data on the troubled housing sector and consumers' pocketbooks in the final countdown to Christmas could lift investors' spirits after a week of surprises that left U.S. stocks sharply lower.

The coming week also provides a look at who on Wall Street is hurting and who is riding out the subprime credit crunch storms, as three of Wall Street's biggest investment banks report quarterly results.

Finally, investors will zero in on the Federal Reserve's auction of $20 billion worth of loans as it seeks to get the credit markets working once more.

Data on groundbreaking for home construction, known as housing starts, is scheduled for Tuesday. According to the median forecast in a Reuters poll of economists, November starts probably fell to an annual pace of 1.18 million units from 1.229 million in October. Building permits, which indicate future activity, are seen dropping to an annual pace of 1.15 million units from 1.170 million in October.

"The market is starting to anticipate a trough in the housing situation," said Brandon Thomas, chief investment officer with Portfolio Management Consultants, a unit of Envestnet Asset Management in Chicago.

"If the numbers don't look good, I don't think it will impact the market much," Thomas said. "And if they do look good, it's a nice benefit. But the market realizes this is going to take awhile to work itself out."

On Friday, the Commerce Department reports on personal income and spending for November. According to the Reuters poll, incomes are expected to rise 0.5 percent and spending is likely to increase 0.6 percent. In October, income and spending were each up 0.2 percent.

The personal consumption expenditure price index, an inflation gauge also known as the PCE index, is expected to show no change from October, when it rose 0.3 percent.

PPI AND CPI SURPRISE MARKET

The PCE price figures will come under intense scrutiny after a surprising 3.2 percent increase in the U.S. Producer Price Index for November, which was released on Thursday. That surge was double the forecast. Markets had expected an increase of 1.5 percent.

On Friday, the U.S. Consumer Price Index for November took a bigger-than-expected jump of 0.8 percent, fueled by higher energy costs. The forecast was for a gain of 0.6 percent.

For the week, the Dow Jones industrial average .DJI fell 2.10 percent, the Standard & Poor's 500 Index .SPX slipped 2.44 percent and the Nasdaq Composite Index .IXIC dropped 2.60 percent.

With just two weeks left in the year, all three major U.S. stock indexes are still in the plus column: The Dow is up 7.03 percent, while the S&P 500 is up 3.50 percent and the Nasdaq is up 9.13 percent for 2007 so far.

This week, the U.S. stock market also was jolted by the Federal Reserve's latest cut in interest rates, which some players thought was not deep enough. Stocks posted steep losses on Tuesday after the Fed's decision.

Stocks rallied early Wednesday after the Fed announced steps it was taking to ease the credit crunch. The Fed move was coordinated with other central banks. But stocks closed that day with only modest gains as concerns lingered.