The economic calendar doesn't look like it will get off to a good start this week. Early this morning the Personal Income and Personal Spending reports for December are announced, and the decline is expected to continue.

Both figures are expected to drop as the employment sector continues to get battered by layoffs and pay cuts. With this reduction in income, spending of course has to slow down. Gone are the days of spending on credit, as that has dried up also.

The ISM Index later today and the ISM Services report on Wednesday are both likely to reflect an ongoing contraction in the manufacturing sector. This month the Index is expected to drop to a reading of 32, and 39 on the Services report. Any reading below 50 shows contraction and both of these continue to head in the wrong direction.

Pending Home Sales for December come out Tuesday, and indications are for no change versus November. In my opinion, this report will actually surprise to the high side. Although the Home Starts and Building Permits reports both fell flat, Existing Home Sales surprised to the upside last week, and I think this report continues that trend. Foreclosures are driving down prices so low that buyers are finally emerging. I would expect this to provide a boost to the Pending Home Sales report.

The final report of the week that I wanted to talk about is what is likely to be the worst one of the week. Non-farm payrolls for January are announced on Friday. To put the expectation of 500k jobs lost into context, the economy shed a little over two million jobs all of last year. Losing one-quarter of that amount in the first month of the year is positively stunning. With all the announcements of job cuts last week, unfortunately I think this report will be worse than expected.

Earnings:
Mon: AFL
Tues: MRK, DOW, UPS, YUM
Wed: BHP, KFT, PM, TWX, BMC, CSCO, NVLS, V
Thurs: GSK, K, MA, VRSN
Fri: TM