"It is a summer blockbuster week for data," said Doug Porter, chief economist at BMO Financial Group.
Traders will consider the latest economic growth data for Canada and the U.S., along with the latest reading on U.S. employment. And on top of that, they will also look for clues about the future of economic stimulus measures when the U.S. Federal Reserve holds its scheduled two-day meeting on interest rates.
The Toronto market ended last week slightly lower after four consecutive positive weeks. The TSX moved down 37 points or 0.29 per cent lower, leaving the main index up 2.02 per cent year to date.
The most important data overall for markets is likely the release Wednesday of second-quarter gross domestic product data in the U.S.
Porter thinks the second quarter will be "pretty sickly" and growth will struggle to come in much better than an annualized gain of one per cent.
"But there are going to be some major revisions and it will be interesting to see if some of the prior quarters aren’t revised up a bit," Porter said.
The latest reading on Canadian economic growth also comes down mid-week and a strong May retail sales report that came out last week showing a 1.9 per cent rise sets the stage for a strong report.
"Employment was up massively in the month, housing starts and sales came bouncing back and both retail and wholesale trade were quite a bit stronger than expected," said Porter, who looked for growth in May to come in at 0.4 per cent, a notch higher than the consensus.
"I would say given what we have seen for May recently, it does seem like the second quarter is going to be better than what the Bank of Canada expected in their Monetary Policy Report in mid-July," he said.
The U.S. Federal Reserve makes its rate announcement Wednesday afternoon and while no one expects rates to go up until sometime late next year at the earliest, traders will look for clues as to when the Fed might start to taper its monthly bond purchases of US$85 billion a month. The program has been credited with keeping long-term rates low and fuelling a rally on stock markets.
The Fed has been at pains to emphasize that it won't move until economic conditions permit "and we’re not there yet in terms of the data to get them to start tapering," added Porter.
He thinks the Fed won't make a move before the September meeting.
Also on the economic calendar, traders expect U.S. employment for July to roughly match the numbers from the two previous months of about 195,000 jobs.
Meanwhile, the focus will be on resource stocks as traders get set for a flood of quarterly earnings from a group of miners and energy companies that have suffered from low prices for oil and metals.
But expectations have been lowered, as witnessed last week by a sharp six per cent runup in Teck Resource's share price (TSX:TCK.B) even as the miner reported sharply lower profits.
"You can look across the board and you had end of the world scenarios sort of factored in to many of those share prices," said Robert Gorman, chief portfolio strategist at TD Waterhouse.
"And I think people are re-evaluating it. Expectations are still low but perhaps they were too low as we look at things."
Miners reporting this week include Lundin Mining (TSX:LUN) and uranium miner Cameco (TSX:CCO).
It's a very heavy week for energy company earnings with Canadian Oil Sands (TSX:COS), Talisman Energy (TSX:TLM), Suncor Energy (TSX:SU) and Imperial Oil (TSX:IMO) posting results.
And while results for the second quarter may be weak compared with last year, the shares of companies in the energy sector found traction over the past month, rising about 6.5 per cent.
Gorman pointed out that the price for West Texas Intermediate, the North American benchmark, has moved up about eight per cent this month amid sliding inventory levels in the U.S.
Efforts to improve the flow of crude southward from Cushing, Okla., the major trading hub for oil, improved the price of Western Canadian Select, a benchmark for the Alberta oilsands.
"The WTI price is higher and the fact that the WCS price, which at one point you were getting 50 cents on the dollar (compared to WTI), they’re now essentially back to the historical spread or discount from WTI," he said.
"This should be good for the energy patch."