a breather for stocks...

A breather for stocks
After two days of gains, markets are set to open flat to lower - but consumer price and housing start reports could shake things up.
August 16 2006: 6:05 AM EDT


NEW YORK (CNNMoney.com) -- U.S. markets could be off to a slow start Wednesday, after two days of gains, as investors weigh the government's July reports on consumer prices and housing starts.

At 6 a.m. ET, Nasdaq and S&P futures were mixed, although a comparison to fair value were indicating a slightly lower to flat open.

Economists surveyed by Briefing.com forecast that the Consumer Price Index, the government's key measure of retail prices due at 8:30 a.m. ET, rose 0.4 percent in July, up from a 0.2 percent rise in June.

The more closely watched core CPI, which strips out food and energy prices, is expected to be up 0.3 percent, the same as the June increase. But the Producer Price Index, the measure of inflation on the wholesale level, came in well below forecasts Tuesday, raising hopes that inflationary pressures may be in check.

The PPI was a key to a rally in both U.S. stocks and bonds Tuesday.Treasury prices rose further in early trading Wednesday, with the 10-year note yield down to 4.92 percent from 4.93 percent late Tuesday.

The other key economic reading Wednesday is the housing starts and building permits report from the Census Bureau, also due at 8:30 a.m. ET.

Economists forecast that housing starts slowed to an annual rate of 1.81 million in July from 1.85 million in June, while permits, seen as a measure of builder confidence, are expected to be down to an annual rate of 1.84 million from 1.87 million in June.

Oil eased ahead of the U.S. fuel inventory report due at 10:30 a.m. ET - the first reading that will show the impact of the shutdown of half the production of Prudhoe Bay, the nation's largest oil field, due to pipeline problems at BP (Charts).

U.S. light crude slipped 18 cents to $72.87a barrel in electronic trading, while Brent crude traded in London was 33 cents lower at $73.47.

Major indexes in Asia closed generally higher Wednesday, with Japan's Nikkei topping the 16,000 mark. Major markets in Europe were slightly lower in early trading. The dollar was weaker against the yen but little changed against the euro in early trading.

In corporate news, chip equipment maker Applied Materials (Charts) reported better than expected earnings after the close Tuesday, lifting shares about 1 percent after-hours.

After the market close Wednesday, computer and peripheral maker Hewlett Packard (Charts) is due to report results, with analysts forecasting nearly a one-third rise in earnings even with only a 5 percent gain in revenue.