The Federal Open Market Committee (FOMC) meets again this week to review economic conditions and set monetary policy. On whether the Fed should end quantitative easing or extend it, Atlanta Fed chairman Dennis Lockhart recently said that the Fed should remain flexible given the rising energy prices, which could be a sign of coming inflation. Either at this meeting or the next, the Fed could signal that interest rates will rise as a hedge against inflation.

Inflation will also be the focus when the Department of Labor releases the Producer Price Index (PPI) and Consumer Price Index (CPI) this week. Back in January the core PPI (which excludes energy and food costs) had its biggest jump in two years, and the core CPI had its largest uptick in more than year, the second month in a row in which consumer prices jumped.

U.S. stock futures are lower Thursday morning as investors await data on the labor market and international trade. Futures on the Dow Jones Industrial dropped 14 points to 11,694 and S&P 500 futures moved down 1.70 points to 1,281.70. Nasdaq 100 futures fell 1.25 points to 2,303.20.

U.S. stocks closed higher yesterday, with the blue-chip Dow index gaining 83.56 points, or 0.72%.

Data on weekly jobless claims, December producer prices and November international trade are due at 8:30 a.m. ET.

Wall Street expects Intel Corp (INTC) to report its Q4 EPS at 53 cents after the bell.

KBR Inc (KBR) projected its FY11 earnings between $2.05 per share and $2.30 per share, versus its earlier projections of $2.18 per share. However, analysts were expecting FY11 earnings of $2.03 per share.

Alcoa (AA), Intel (INTC) and JPMorgan Chase (JPM) will kick off a new earnings season this week when they report their results for the fourth quarter of 2010. Here's a quick look at what analysts surveyed by Thomson Reuters expect to see, followed by a glance at what's coming up on the economic calendar.

Alcoa

During its fourth quarter, Alcoa saw increased demand in emerging markets, sold surplus properties, and shared revenue targets with investors. Analysts forecast that earnings for the period will come to 19 cents per share, up from just a penny per share in the same quarter of last year. The New York-based aluminum producer also is expected to post revenue of $5.7 billion for the three months that ended in December, which is 4.5% more than a year earlier.

FedEx Corp. (FDX), the world's leading package delivery service and an ostensible bellwether of the U.S. economy, will dance its way onto the earnings stage this week. Also, with the holiday shopping season well underway, Best Buy Co. (BBY) and Discover Financial Services (DFS) are scheduled to offer up their most recent quarterly results.

Here's a closer look at what the analysts surveyed by Thomson Reuters are expecting from these three, plus a peek at the week's economic calendar.

According to the Labor Department, U.S. producer prices increased a seasonally adjusted 0.4% during October thanks mainly to an increase in energy prices.

Energy prices increased 3.7% during the month, the largest monthly increase since January. This increase was driven (so to speak) by a 9.8% increase in gasoline prices. Food prices dropped 0.1% during the month, with plunge led by a drop of 8.1% in the government's index for fresh and dry vegetables.

U.S. Federal Reserve Chairman Ben Bernanke gave his reasons for more quantitative easing, dubbed QE2, in a speech at the Federal Reserve Bank of Boston, and reported in the Wall Street Journal.

The linchpin of his thesis is that inflation is too low, currently running at 1.1%. This is lower than the 2% level that the Fed had previously set.

Bernanke gave a rather gloomy assessment of the economy, saying that business spending has slowed, consumer finances are improving unevenly, housing remains depressed and job growth isn't enough to bring down unemployment.

The earnings season kicked off last week with better-than-expected results from Alcoa (AA) and Yum! Brands (YUM), while Marriott (MAR) and Pepsico (PEP) met consensus EPS estimates. This week, bellwether companies Intel (INTC), General Electric (GE), Google (GOOG) and JPMorgan Chase (JPM) are scheduled to report their third-quarter results, and analysts polled by Thomson Reuters are looking for earnings growth from all of them.

Santa Clara, Calif.-based Intel announced the acquisition of McAfee and joint ventures with General Electric and Nokia (NOK) during its third quarter. Analysts forecast earnings for that period to come to 50 cents per share, which is up 34.0% from the same period of last year. The number one semiconductor maker's revenue for the three months ended in September is expected to total $11.0 billion, or 17.1% more than a year earlier. Looking ahead to the full year, the forecast thus far is for earnings of $1.94 per share (+44.8%) and $43.3 billion in revenue (+23.4%). The per-share earnings topped analysts' expectations in the past four quarters, by as much as a dime per share.

The Labor Department reported that producer prices rose 0.4% in August, more than the 0.3% analysts expected, the New York Times reported. This was also double the July figure of 0.2%. But when food and energy prices were removed, the core index rose only 0.1%, meaning inflation was in food and energy.

With these numbers, the government no doubt will loudly proclaim that inflation is not a problem. If you multiply 0.3% by 12 (the difference between the overall index and the core index), you get 3.6% -- all of it in food and energy.

Last week, the Fed's Beige Book report confirmed that the economy continues to grow, but at a slower pace than in previous periods. This week will bring plenty of economic data to either support or contrast with the Fed's findings.

• Monday: Federal government budget balance for August
• Tuesday: Business inventory numbers from July, TIPP Economic Optimism Index for September, retail sales data from August
• Wednesday: Industrial production in August, Empire State Manufacturing Survey for September, Import Price Index for August
• Thursday: Producer Price Index for August, Philly Fed Survey for September, the Current Account Balance in the second quarter, jobless claims for last week
• Friday: preliminary University of Michigan Consumer Sentiment Index, Consumer Price Index for August, real earnings data for August

The inflation hawks, hard-pressed to find inflation in either the consumer price index or the producer price index, or their core rates, have not given up their mission to find inflation when it doesn't exist, and isn't likely to for a long time.

CPI is running at a 2.2% annual rate, and the core rate is 0.9%. PPI is running at a high annual rate, 5.5%, but exclude food and energy, and the core rate is up just 1.0%.

The typical, alternate argument forwarded? When cash-flush banks start lending in a big way again, we'll have many more dollars chasing essentially the same amount of goods, and inflation will zoom to much higher levels.

If there's an inflation hawk that's still circling, no doubt it will now be headed back to its nest. For a long time.

The reason? The April producer price index report, which revealed an 0.1% price decline in April, and an 0.2% rise excluding food and energy. Further, the core-PPI is up a scant 1.0% in the past 12 months, and when combined with the 1.1% increase in the core consumer price index in the same period, the picture is one of disinflation. Even worse, the threat of deflation continues.

The red coats are coming! This time they are from continental Europe. Today's drop was tied to tighter financial reform and a ban on naked short selling in Germany. Oh well, an excuse is an excuse. PPI did not even matter because of the price drop in oil of late, and we did see housing starts were up, but building permits were down.

Here were today's closing bell levels:

S&P 500 1,120.80 -16.14 (-1.42%)
Dow 10,510.95 -114.88 (-1.08%)
Nasdaq 2,317.26 -36.97 (-1.57%)

The most compelling statistic, so far in 2010, from an investment standpoint? Arguably, it's inflation, or the lack thereof.

More than 12 months in to the biggest fiscal stimulus in the history of the modern world, and more than 15 months into the Fed's quantitative easing program, inflation, as measured by the Consumer Price Index, is running at ... about 2.3% since April 2009, according to data compiled by the U.S. Labor Department. Further, take away the volatile food and energy component, and inflation at the retail level is running at a minuscule 1.1% since April 2009.

Stocks started out strong, but despite the lower producer inflation via PPI the markets were mixed and the net result was not certain until the very end of the day. Many of the Warren Buffett stocks and George Soros stocks were among the movers today. One issue affecting stocks ahead is that investors and traders alike are starting to figure out that cost cuts at the likes of what was seen over the last year cannot go on forever, and that benefits can only add so much.

Here were today's unofficial closing bell levels:

Dow 10,423.81 +16.85 (0.16%)
S&P 500 1,110.31 +1.01 (0.09%)
Nasdaq 2,203.78 +5.93 (0.27%)

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Markets were mixed and downish Tuesday, but there was some good news to be found.

Housing starts and building permits soared, causing a big pop in shares to battered homebuilders. Whether this is a false start or a real jump, its hard to get anything but good news out of a housing market so beaten down.

On the industrial side, the Produce Price Index remained relatively stable, walking the narrow path between two evils -- deflation and inflation.