The Last Week in Review:

With the mid-term election season now underway there have been numerous stories about the prospects of the Democrats recapturing Congress. But currently it is far from certain that the Democrats can capture either house of Congress. The next few weeks will be crucial. The significance of a partisan controlled Congress to the stock market outlook is subject to intense debate.

If recent history is an indicator, the Republicans are likely to gain in the polls as the election approaches, making it very tough for the Democrats to win back either house. However, as many political pundits note, the Democrats have not had control of the House of Representatives since the 1994 elections. There is a lot of pent-up desire to push legislation geared more at wealth distribution than wealth creation. Many Democrats recognize that the drug industry, oil companies, defense companies, and the big-box retailers would be subjected to greater regulatory supervision under a Democrat congress.

Turning to the stock market, it is the opinion of many economists that the economy is slowing much too fast. The housing data reported recently has exacerbated this concern indicating the highest inventory for unsold existing homes in 13 years. On the other hand, more positive news on inflation, combined with falling crude oil prices have given the market reason to rally. Most of the indexes are at or near multi-year highs. The Dow rallied 168 points, increasing its year to date gain to 7.9%, while the NASDAQ was up 69 points, increasing its year-to-date gain to 1.8%. The S&P 500 ended up 20 points, increasing the year-to-date gain to 5.7%. The Russell 2000 also closed the week up 20 points and increased its year-to-date advance to 8.3%.

The Week Ahead

This week software giant Oracle (ORCL) reports their results on Tuesday after the market closes. On Wednesday, Morgan Stanley (MS), CarMax (KMX) and Circuit City (CC) report results. Earnings from Carnival (CCL), ConAgra (CAG), FedEx (FDX), General Mills (GIS) and Rite Aid (RAD) will be released before the market opens on Thursday, while Nike (NKE) posts their results after the close.

The economic news will be significant this week, highlighted by the FOMC decision on interest rates on Wednesday at 2:15 pm EST. Most economists expect the Fed to leave rates unchanged due to reduced inflation pressures. Monday morning, the July Net Foreign Purchases will be reported. Tuesday morning before the bell, the PPI numbers will be announced, along with the Building Permits and Housing Starts for August. The August Weekly Initial Jobless Claims will be released before the open on Thursday followed by a mid-morning announcement of the August Leading Indicators. The Philadelphia Fed Index will be announced at noon on Thursday.

The conference schedule will be very active this week, beginning with Bank of America's 36th Annual Investment Conference on Monday in San Francisco. Credit Suisse hosts its 19th Annual Chemical Conference beginning Tuesday in New York. The UBS Global Paper and Forest conference in New York also begins on Tuesday.

In summary, investors should focused on the PPI report on Tuesday and the FOMC decision on interest rates on Wednesday.

Stay tuned!