As the tax debate continues, will the market show improvement this fall? By Ken Mahoney

After taking one giant step back on Tuesday followed by three baby steps forward on Wednesday, Thursday, and Friday, U.S. stocks managed to rise into positive territory for the second straight week. Although September is traditionally the worst performing month of the year for equities, stocks have been on the mend so far as reports on the labor market, manufacturing, and business activity have been better than expected. Recent economic reports are confirming that while the rate of economic recovery has slowed, it's still on a positive trajectory.

The President also agrees with this sentiment as expressed by his words Friday at a nationally televised news conference. "While the economy is growing again...the hole in the recession left was huge and progress has been painfully slow," he said. Over the last week, Obama has rolled out a series of new proposals, including a six-year, $50 billion plan to rehabilitate the nation's transportation infrastructure and provide jobs. He also called for federal income tax rates to return to their pre-Bush levels for the 2-3% of Americans who earn more than $250,000 – a move that will bring in $700 billion to the US treasury, Obama said. Critics argue that while $700 billion is a hefty sum, it is hardly enough to close the fiscal gap, and is likely to do more harm than good as the nation’s highest income earners curtail their spending.

In the week ahead, readings on retail sales, industrial production, jobless claims, and consumer prices should help give direction to the markets. And with November elections fast approaching, politics are also in play. Currently, all three indexes are hovering around what analysts consider to be key levels, and are likely to meet continued resistance until more economic numbers come in positive. At this point, most people accept that the recovery is going to be slower than expected. What they are looking for is further confirmation that it is expanding rather than contracting.

Key things to watch this week:

Monday – Treasury Budget
Tuesday – Retail Sales, Business Inventories
Wednesday – Industrial Production, Empire State Manufacturing Survey
Thursday – Producer Price Index, Jobless Claims, Philadelphia Fed Survey
Friday – Consumer Price Index, Consumer Sentiment


HEADLINES:

The Greek government is planning no new austerity measures as part of efforts to pull the country out of debt and might even exit international supervision earlier than expected, the prime minister said Sunday. George Papandreou said Greece was on track to meet targets for reducing its deficit by nearly 40% this year.

China's major economic indicators picked up in August after slowing for several months, data issued over the weekend show, an unexpected rebound that could help prospects for global growth.

Michael Barr, assistant treasury secretary for financial institutions, and Edward DeMarco, acting director of the Federal Housing Finance Agency will testify on Capitol Hill next week on the future of Fannie Mae and Freddie Mac. Barr and DeMarco will appear before the House Financial Services Subcommittee on Capital Markets on September 15.

Work on the ultimate seal of BP's troubled gulf oil well will begin sooner than expected, officials said Friday. The 'bottom kill' procedure, in which the well is filled with mud and cement, will start this weekend – closing for good the well that spewed 4.9 million barrels of oil into the Gulf of Mexico.

Donald Trump offered Friday to purchase the site of the proposed mosque near Ground Zero in order to end the national controversy. His bid includes $4.8 million, the amount that businessman Hisham Elzanaty paid for the two-building site, plus a 25% premium. But Elzanaty's lawyer, Wolodymyr Starosolsky, blasted the offer as a publicity stunt and told The Post that his client "found this letter somewhat laughable."