The U.S. economy returns back with more fundamentals that would help shed more light over the current economic conditions, as last week was mainly highlighted by the jobs report, which provided a better than expected outlook for the labor market, while this week investors will be focused on retail sales and confidence, since they represent the major highlights for the week.

The start however will be with the wholesale inventories, which are expected to rise by 0.2% from the prior reported drop of 0.8%, where it seems that inventory levels are recovering, since manufacturers and producers are starting to build their inventories amid expectations of rising demand levels in the near future all around the globe. Also business inventories are expected to have risen in the month of January by 0.1% following the prior reported drop of 0.2%, which might suggest that businesses are also expecting an improvement in demand levels, and accordingly they are starting to build their inventories in order to meet future demand.

Meanwhile, the monthly budget statement is expected to show a huge deficit in February, where expectations signal that the budget deficit will widen to $202.0 billion from the prior reported deficit of $42.6 billion. The U.S. government expanded its spending throughout the recession in order to support economic activity, where the budget deficit is expected to top $1 trillion this year.

The U.S. government will have to deal with the consequences of the rising budget deficit, as it might indeed hammer the status of the U.S. dollar as the world’s reserve currency, however, the U.S. government is fully committed to reviving economic activity at the moment, and to be fair, without the huge fiscal stimulus provided by the U.S. government, the U.S. economy would have suffered a deeper recession.

The U.S. Commerce Department is expected to announce that the trade deficit widened in January to $41.0 billion from the prior reported deficit of $40.2 billion in December, where the rising value of the U.S. dollar must have affected exports, since the U.S. dollar has been gaining against most of its counterparts over the past period, and a rising value of the dollar would definitely affect exports negatively.

Meanwhile, investors will be highly focused on the retail sales data for the month of February, especially after retailers reported better than expected sales even though the nation was struck with one of the worst snowstorms in decades.

The retail sales are expected to show a drop of 0.2% in February following the prior reported rise of 0.5% back in January, while retail sales that exclude autos are expected to rise by 0.1% following the prior reported rise of 0.6%.

Retail sales account for more than 50% of consumer spending, and given that consumer spending has been improving over a moderate pace over the past few months, we might witness further improvement in retail sales, however, the snowstorms during February might have affected retail sales negatively, and accordingly we should be careful over this particular index in specific.

Finally, the University of Michigan will release its preliminary March estimate for consumer confidence, where expectations signal that we might witness a slight increase in confidence, where the recent improvement in economic conditions started to be reflected through higher confidence levels, and that surely provides a stronger ground for the ongoing recovery, since that when consumers are feeling confidence about the economy, they tend to spend more and that can only benefit the economy.

Investors will be focused dear reader this week on economic fundamentals, since the earnings season has come to an end, and accordingly investors will be making their moves in stock market based on the outlook for the economy, as a better outlook will lead investors to feel more confident and that will lead them to invest in stocks and other higher yielding assets, while a change in the outlook to the worse will reverse the situation, however, we don’t have any reason to believe why stock markets won’t continue to rise given the current situation and outlook…