Investors gird for higher oil, bleak housing data

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"There may be some factors that are helping to control inflation," Strauss said, noting that many businesses are holding back wage increases. "That's a shock absorber to inflation."

But he added, "consumers are feeling the pinch here. What they have to spend on nondiscretionary items is going up. At the same time, real income growth is being challenged."

Investors will get more information on how strapped consumers are in earnings reports next week from retailers including Home Depot Inc., Hewlett-Packard Co., Staples Inc., Target Corp., BJ's Wholesale Club Inc., Barnes and Noble Inc. and Gap Inc.

As data pile up, they will give not only investors but also the Federal Reserve a better idea of where the economy is headed in the second half of the year. On Wednesday, the Fed releases minutes from its April 29-30 meeting, when it lowered key interest rates by a quarter percentage point and flagged inflation as a growing concern. Many investors expect the central bank to keep rates on hold at its next meeting in late June to keep inflationary pressures in check.

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