Last week’s economic data for May and June on leading indicators, jobless claims, housing starts and manufacturing supported our view that the U.S. economy was on track to emerge from recession in the second half of 2009. Meanwhile, the inflation data for May continued to show headline deflation and only modest inflation at the core level.

Looking ahead to this week, markets will be focused on another batch of housing data for May (new and existing home sales) and data on business capital spending and consumer spending in May (durable goods orders and personal income and spending). The key event for the week, however, is likely to be the Federal Reserve’s Federal Open Market Committee (FOMC) decision. With Fed policy on hold . . . .

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