The Last Week in Review:

Five years ago the economy was in a recession and had been for about a year. Then the 9-11 terrorist attacks hit America. The S&P 500 index had fallen 400 points over that same period. The attacks worsened what was already a bleak outlook. Fast forward five years, the economy has boomed and the S&P 500 index is up 19%. That is a valuable lesson for today's investors. The tech bubble was already bursting prior to the attacks. The S&P 500 index had declined from a high of 1514 in August 2000 to 1093 on September 10, 2001. That was a 27% drop in a little over a year. The index dropped another 9% the next few weeks and by late September 2002, a little over a year after the 9-11 attacks, the S&P 500 had lost 25% since that fateful day. There are always reasons to be concerned, but the long-term wealth creation power of the U.S. economy ultimately brings value to stocks.

Pessimism still abounds today as well in both the economy and the stock market. This is despite the fact that both are doing relatively well. The S&P 500 index now sits at about 1300. The index was up 9% in 2004 and 3% in 2005. So far this year, it is up 4%. That averages very near the longer-term trend of 7% per year. The outlook for the year ahead is for slowing but steady growth as well. Concerns about the economy seem a bit overblown. The housing market is clearly weak, but the broader trends are steady. Growth should be around 2% to 3%.

Last week during the holiday-shortened Labor Day week, trading remained sluggish. The Dow lost 72 points, dropping its year to date gain to 6%, while the NASDAQ lost 27 points and is now down 2% for the year. The S&P 500 lost 12 points, reducing its year-to-date gain to 4%, while the Russell 2000 fell 13 points to reduce its year-to-date gain to 5%.

The Week Ahead

This week Campbell's (CPB) will report earnings on Monday before the bell. Tuesday earnings reports from Best Buy (BBY), Goldman Sacs (GS), and Kroger (KR). Lehman Brothers (LEH) will direct the market. On Wednesday Bear Stearns (BSC) releases earnings. Friday, Carnival (CCL) post results before the bell.

The economic news for next week could give investors a little insight on inflation. Tuesday, the monthly Trade Balance will be announced. On Wednesday, the weekly Crude Inventory levels are released along with the Treasury Budget. Thursday morning, Import and Export prices excluding oil, as well as initial weekly unemployment claims and August retail sales will all be reported, along with July Business Industries. Friday the all important report on inflation, the August CPI will be announced. Also on Friday, the September New York Empire State Index will be released along with the Industrial Production, Capacity Utilization, and the Preliminary September Michigan Sentiment Index numbers.

In summary, investors should focused on the CPI report on Thursday as well as watch price of oil and the housing sector as keys to comsumer spending.