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NEW YORK (CNN/Money) -
It's less than two weeks since one of the worst natural disasters in U.S. history, yet the stock market has shown a resilience that many market watchers hope the economy will show as well.
While the details are destined to be vague for at least a few more weeks, gross domestic product growth in the current quarter is, by all accounts, expected to be hit by the impact of Hurricane Katrina.
Earlier this week, the Congressional Budget Office estimated that the hurricane could end up costing at least 400,000 jobs and cut 1 percent off economic growth in the second half of the year.
Stocks have risen for two weeks straight, and oil prices have backed off their post-Katrina highs amid reports that damage to the oil infrastructure along the Gulf Coast was not as bad as had been feared.
Some analysts argue that the stock market may be wearing rose-colored glasses, and not fully incorporating the economic impact of the hurricane.
However, it may also be the case that the market is looking six months out, and seeing that the impact on the economy outside the Gulf region will not be overwhelming.
Recent studies from research firms Ned Davis Research and Standard & Poor's suggest that. The reports show that the long-term impact of the tragedy on both earnings growth and GDP growth is likely to be moderate, if the behavior of the economy after major hurricanes over the past 20 years is to be taken as a barometer.
Always forward-looking, the stock market may be focusing on this, said Douglas Altabef, managing director at Matrix Asset Advisors.
"As we continue to see progress in New Orleans and the shock and horror begins to ease, there's a sense that whatever economic damage has been done short term could be stimulative longer term," Altabef said, referring to the perceived boost that rebuilding would give to the construction, housing and labor markets.
Looking forward, "oil prices will likely continue to drift lower, which should support the market," he added.
The Fed and inflation
After the hurricane first hit land and oil prices spiked, the perception was that the Federal Reserve would need to take a breather in its 14-month interest-rate hiking campaign. Some Fed watchers have argued that the Fed will take a pause as soon as the upcoming Sept. 20 meeting.
Yet, comments from Fed officials this week, and the turnaround in oil prices, have taken the wind out of such bets. Earlier in the week Chicago Fed president Michael Moskow indicated that the central bank is unlikely to stray from its mission of measured rate hikes, due to worries about inflation.
"I think the Fed knows that a pause at the upcoming meeting would upset the market by sending the message that the Katrina impact is really bad," said John Forelli, portfolio manager at Independence Investments.
However, continued speculation about what the Fed will do through the end of the year -- and what it will imply in its statement -- is likely to stay in focus in the week ahead, Forelli said. This is particularly due to the heavy spate of economic reports that deal with inflation.
But the mostly August reads that are on tap this week -- including regional manufacturing, consumer and producer prices and retail sales -- cover mostly the pre-Katrina period.
"The reports won't tell us about Katrina yet," Forelli said. "But they will be relevant in that people will be looking to see that the economy was strong before Katrina."
Key events in the week ahead
- Best Buy (Research) reports earnings Tuesday morning. The consumer electronics firm is expected to have earned 38 cents per share, according to Reuters forecasts, after earning 35 cents a year earlier.
- The July trade balance, due Tuesday, is forecast to have widened to $59.5 billion from $58.8 billion in June, according to a consensus of economists surveyed by Briefing.com.
- The Producer Price Index (PPI), due Tuesday, is seen climbing 0.7 percent in August after being up 1 percent in July; the so-called "core" PPI, which excludes often volatile food and energy prices, is projected to have increased 0.1 percent after gaining 0.4 percent in July.
- August retail sales, due Wednesday, are projected to have slipped by 1.2 percent after rising 1.8 percent in July; sales excluding the often volatile autos component are predicted to be up 0.5 percent after growing 0.3 percent in July.
- Industrial production in August is on target for 0.3 percent growth, after being up 0.1 percent in July. The report, due Wednesday, is paired with the August read on capacity utilization, which is seen rising to 79.8 percent from 79.7 percent in July.
- Due Thursday, the NY Empire State Index, a regional read on manufacturing, is estimated to have retreated to 18.3 in September, according to forecasts. The index stood at 23.0 in August.
- The outlook for the Consumer Price Index (CPI), also due Thursday, is for a 0.5 percent spurt in August, matching July; the "core" CPI's increase is forecast at 0.2 percent, double July's 0.1 percent in the month.
- Due Thursday, July business inventories are expected to have risen 0.3 percent, according to forecasts. Inventories were unchanged in June.
- Also Thursday, the Philadelphia Fed index, a regional manufacturing survey, is seen diminishing to 15 in September from 17.5 in August.
- Brokerage Bear Stearns (up $0.75 to $104.66, Research) reports earnings Thursday morning and is predicted to have earned $2.35 per share, up from $2.09 in the year-earlier quarter.
- The September read on consumer sentiment from the University of Michigan, due Friday, is projected to have pulled back to 86.5 from 89.1 in August.
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