Last week economy watchers appeared to have much to cheer about. Reports on housing starts and home resales in July revealed that both were at their highest levels since 2007, and consumer prices were up only slightly.
The odds of an interest-rate increase from the Federal Reserve in September appeared to be rising again.
But the news on housing and inflation was eclipsed by the falling U.S. stock markets. On Friday, the fourth consecutive day of declines, the Dow Jones industrial average closed down 3.1 percent, the S&P 500 lost 3.2 percent and the Nasdaq composite index closed down 3.5 percent.
Global market declines occurred after China released manufacturing data showing fresh evidence of problems at the heart of the Chinese economy, The Guardian said in a report on the selloff.
The selling continued on Monday as the Dow briefly fell more than 1,000 points, the largest point drop it has ever had. The tumble followed an 8.5 percent decline in Chinese markets, and that sparked a selloff in global stocks, oil and other commodities.
The Dow Jones industrial average fell 585.66 points, or 3.56 percent, to 15,874.09, the S&P 500 lost 77.49 points, or 3.93 percent, to 1,893.4, and the Nasdaq dropped 179.79 points, or 3.82 percent, to 4,526.25.
Meanwhile, the new week brings reports on new-home sales, durable goods orders, personal income and consumer spending for July, consumer confidence for August and second-quarter gross domestic product.
MarketWatch said the consensus forecast of economists is for new-home sales of 510,000, up from 482,000 the previous month, a boost in the Conference Board’s Consumer Confidence Index to 94.0 from 90.9 in July and 3.3 percent growth in GDP. Personal income and consumer spending are also forecast to have risen from previous gains.
As reported last week, U.S. housing starts rose to a near eight-year high in July. Groundbreaking increased 0.2 percent, to a seasonally adjusted annual pace of 1.21 million units, the highest level since October 2007. June and May starts were revised higher, a sign that builders are growing more confident in the economy, Reuters reported.
U.S. consumer prices rose only slightly in July as airline fares recorded their biggest drop since 1995, but tame inflation weren’t considered likely to discourage the Fed from raising interest rates this year.
The Labor Department said its Consumer Price Index edged up 0.1 percent, with gasoline and food prices increasing marginally. July's rise marked a sixth straight monthly increase.
Although inflation remains soft, a strengthening economy, marked by a tightening labor market and a firming housing sector, should give the U.S. central bank confidence that it will gradually move toward its 2 percent target, economists said.
"Fed officials made clear that they do not need to see higher inflation before hiking. They just need to have reasonable confidence it will return to mandate," Michelle Girard, chief economist at RBS in Stamford, Conn, told Reuters.