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Scaredy-cat consumers, housing stall, Yellen in Jackson Hole: The week ahead

Stock prices fell and oil prices rose Friday after reports that Ukrainian forces attacked a Russian convoy in Ukraine. Fresh concern about geopolitical tensions canceled out earlier gains for stocks, which ended the day mixed after paring much of the earlier steep losses. Before the reports from Ukraine, stocks were higher on signs the economy is improving, but not too quickly. Producer prices rose 0.1% in July, slightly less than the 0.2% economists expected. Consumer confidence, however, missed expectations, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index for August.

‘Consumers are afraid’

Consumers will be in focus in the coming week after the Commerce Department reported retail sales nationwide were flat for the month of July, and Walmart (WMT) and JC Penney (JCP) turned in lackluster results.

Some big-name discount retailers are slated to report quarterly results in the coming week as well. Dollar Tree (DLTR) reports on Thursday. The company just agreed to buy rival Family Dollar Stores (FDO) for $8.5 billion. The combined company would be slightly larger than Dollar General (DG), another rival some say could be a possible bidder for Family Dollar.

One analyst said Walmart's decision not to buy Family Dollar was “the first major failure” of Walmart President and Chief Executive Doug McMillon’s administration. Dollar stores, in general, have been hard hit by the economy, with their bread-and-butter customer seeing slow wage growth and cuts to food stamp programs.

Fellow discounters Target (TGT) and TJX Corporation (TJX) are also slated to report results in the week ahead, as is The Gap (GPS). The company revised its guidance higher this week after a couple of disappointing quarters.

Yahoo Finance’s Milanee Kapadia says it’s all about consumer confidence: “Consumers are still afraid to open up their wallets after a difficult winter.”

Americans not spending on housing

It's not just retailers feeling the sting of a more conservative consumer. New reports this week reveal consumers are also reluctant to spend on housing.

Mortgage borrowing is at a 14-year low. Mortgage applications are at a 6-month low and refinancing activity is at its lowest level since 2008. That lack of activity may come as a surprise considering that mortgage rates are near their lows for the year. Freddie Mac said Thursday the nationwide average for a 30-year mortgage rate fell to 4.12% from 4.14% the previous week. So far, though, those low rates are not adding up to new activity in the housing market.

“Americans are borrowing more for student loans and autos and credit cards, but not for housing,” says Yahoo Finance Editor-in-Chief Aaron Task. “We’ve had this big drop in rates... the question is: Is that going to spur more activity in the housing market? To date, it hasn’t done it.”

Among the housing reports on tap this week: Housing starts on Tuesday and existing home sales Thursday.

A pair of earnings reports will provide a glimpse into the consumer's state of mind where the housing market is concerned. Home Depot (HD) and Lowe’s (LOW) both report in the week ahead. Task says those results will provide some “sense of the psychology of the American consumer.”

When Yellen speaks

Housing is one sector of the economy that Federal Reserve Chair Janet Yellen has highlighted as an area of concern, based on the slow pace of the recovery in the housing market.

The other is the job market, and that will be the theme of the Kansas City Federal Reserve’s annual economic conference in Jackson Hole, Wyoming, where Yellen will deliver the keynote address.

The health of the labor market will be a critical factor in determining when the Fed will begin to raise interest rates. Persistently high levels of long-term unemployment and the persistently low rate of labor force participation will be two of the factors the Fed governors will have to consider.

Yahoo Finance Senior Columnist Michael Santoli says Yellen will have to address those questions. “Nobody really thinks there’s going to be a very strident policy message coming out of here from Janet Yellen,” he said. “But she’s probably going to have to characterize whether she thinks the job market has really got a head of steam behind it and wage inflation is on the horizon or if she thinks it’s still early days.”

Santoli thinks Yellen will have a reassuring message. “The question is: Is it already baked into the market?"

'He could move the markets'

Also on tap to speak at the conference is European Central Bank president Mario Draghi. His speech will be closely watched after he warned earlier this month that the dual crises in Ukraine and the Middle East pose a “heightened” threat to economic growth in Europe.

The ECB held rates steady for a second-straight month, but Draghi acknowledged that European economic momentum had slowed and new geopolitical tensions would only do more harm.

Task says Wall Street will be watching Draghi’s speech closely: “He can move markets.”

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