The US economy is likely to “stagnate” in the second half of this year, says the International Monetary Fund (IMF).

It has also warned that there will be no real growth in activity in the US until well into next year.

US stocks are hurting, too, particularly those in the financial sector. Shares in banking giants Citigroup and Merrill Lynch both dropped about 6% at the end of last week — and there are rumors that bellwether Merrill is on the verge of issuing a profits warning.

No wonder. The Daily Telegraph has it that the sector faces up to $10 billion in further banking writedowns on the back of serious downgrades to the world’s two largest bond insurers, Ambac (NYSE:ABK) and MBIA (NYSE:MBI).

“The rest of the week could be a potential landmine for the markets,” says Christian Hill in Investor’s Daily Edge.

The first of many important reports this week is Consumer Confidence for June, which comes out at 10:00 am tomorrow morning. Last months reading was 57.2, and this month expectations are for a slight decline, down to 57.

While the decline is mostly expected, I feel the amount of the decline is excessively optimistic. Gas prices keep rising, and May’s unemployment figures showed the highest monthly jump in more than two decades. This leads me to believe there is a very good chance the figure comes in closer to 56, well below expectations.

Wednesday gets going quickly with the Durable Orders report at 8:30 am. The report is expected to show zero growth, which would still be an improvement over last month’s contraction.

This report is tough to call. Since the Economic Stimulus checks started hitting mailboxes last month, retail sales have improved. But is this increase in spending the reason for the expected improvement from last month’s 0.50 percent drop to this month’s 0 percent growth?

Hard to say, but I wouldn’t be surprised to see this report eek out a small gain of a few tenth’s of a percent.

On Wednesday, the New Home Sales report for May is expected to show a decline in sales of approximately 16,000 units. Later in the day, the Existing Home Sales report for May is expected to show an increase.

I think both will beat estimates, and here is why: last months’ New Home Sales report beat expectations, and the most recent Construction Spending, Pending Home Sales, and Building Permit reports all beat expectations.

I think the surprise could come from the fact that the home-buying season is just starting in northern states, which typically grinds to a halt during winter months.

Wednesday also has the FOMC Policy Statement, when the Fed will announce if interest rates are changing. Investors are expecting rates to remain the same, but their statement afterwards will be closely monitored. The explanation of their actions or inaction will cause the market to react.

The week ends with Personal Income and Personal Spending reports on Friday. As expected, the Personal Spending report will likely show a hefty jump from last month. Personal Income is also expected to increase, and I can only think this is due to economic stimulus checks, not from any real, long-term increase in personal income.

Source: A Very Important Week for the Market