The Last Week in Review:

Although the odds are still fairly slim that the U.S. economy will fall into a recession over the next year, there is still plenty to worry about, so say the pessimists. There are two major risks to the economy--soaring oil prices and a severe housing slowdown.

Oil prices, potentially, could soar if the Mideast melts down into open warfare or if an effective terrorist attack struck oil supplies. In the current hurricane season, there is also the possibility that another Katrina-like storm could disrupt oil and gas production in the Gulf.

The housing sector is a risk because if house prices do decline severely and the consumer responds by sharply curtailing his spending, this would greatly harm the economy. A lot of consumption has been spurred by funds generated through second mortgages and home equity loans. If homeowners see capital gains on their homes turn to losses, it could spell trouble for the consumer sector.

Despite the pessimism, stocks closed last week with all of the major averages at three month highs following positive economic news. The Dow rallied 180 points, lifting its year-to-date gain to 7%. The S&P 500 added 16 points and is now up 5% for the year. The NASDAQ reversed its recent downtrend and gained 53 points, reducing its year-to-date loss to 0.6%. The Russell 2000 was the best performer of the week with a 22 point gain, lifting its year-to-date gain to 7.2%.

The Week Ahead

This holiday-shortened week begins on Tuesday, when Applied Materials (AMAT) holds an analyst meeting. Pathmark Stores (PTMK) and home-builder Hovnanian Enterprises (HOV) report earnings on Wednesday. On Thursday, UTI Worldwide (UTIW) and National Semiconductor Corporation (NSM) release earnings. This, along with AMAT's analyst meeting, will shed light on the semiconductor sector. On Friday, Parker-Hannifin (PH) will hold an analyst meeting. The economic calendar is relatively light this week. Wednesday, the Revised Productivity for Q2, August ISM Services and Weekly Energy Inventories will all be reported. Thursday, the Weekly Jobless Claims along with July Wholesale Inventories will be released, while the Consumer Credit for July will be announced on Friday.

The conference schedule is very this week. Citigroup holds its 13th Annual Global Technology Conference in a three-day event beginning Tuesday. Lehman Brothers will hold a three-day CEO Energy Conference, also beginning Tuesday. Kaufman Brothers holds a two-day Investor Conference and Roth Capital Partners holds their two-day Investor Conference, both beginning Wednesday. Goldman Sachs holds a three-day Retailing Conference, also beginning Wednesday.

In summary, investors should stay focused on the price of oil and the housing sector as keys to comsumer spending.