On deck: Congressional testimony by the Fed Chairman, March readings on employment and activity in the manufacturing and services sectors

The markets will have a lot to absorb this week. Perhaps most important, Fed Chairman Ben Bernanke goes up to Capitol Hill on Wednesday morning to testify before the Joint Economic Committee on the economic outlook. It's his first public appearance since the collapse of Bear Stearns (BSC) and the Fed’s Mar. 18 rate cut. Bernanke will have an opportunity to explain more fully the Fed’s latest innovative policy moves and its decisions on the handling of the mess at Bear.

The Fed has taken extraordinary actions over the past couple of weeks, opening up many tough questions, which the Fed Chairman will have a chance to address, especially the unusual terms of the $30 billion loan to JPMorgan Chase (JPM) to facilitate Morgan’s purchase of Bear. Lawmakers will be especially interested in those loan terms, along with other moves by regulators that could be putting tax-payer money at risk, including raising the investment limits for Fannie Mae (FNM), Freddie Mac (FRE), and Federal Home Loan Banks.

Congress will be particularly interested in the Fed’s decision to open up its lending window to securities dealers. In recent years, the lines between commercial banks and many securities firms have been blurred, but the Wall Street companies have remained lightly regulated. Now that the Fed is funding securities dealers, the Fed may have to take on more regulatory authority over their operations.

The overarching issue during Bernanke’s testimony will be the state of the economy, as more and more economic reports point to recession. The first round of top-level reports for March will offer some insights. In particular, the Institute for Supply Management’s (ISM) index of manufacturing activity, due on Tuesday, and the ISM’s nonmanufacturing gauge, on tap for Thursday, will offer important information on the recession question. Through February, the indexes were not clearly signaling that the economy was in a recession, but they have been zigzagging downward in that direction.

While the markets are sure to give ISM numbers plenty of scrutiny, their attention will be riveted to Friday’s employment report. Consumers are most likely the key to the severity of any recession this year, and the worse the job markets deteriorate, the harder consumer spending is likely to get hit. Expectations are for no gain in payrolls and a small uptick in the jobless rate. Any results much worse than that would almost certainly mean another dreary Friday close for the stock market.

Here’s the weekly economic calendar from Action Economics.

Top Reports for the coming week

Reports

Date

Time

For

Mean Estimate

Last Period

Chicago Purchasing Managers Index

Monday, March 31

9:45 a.m.

March

46.0

44.5

ISM Manufacturing Index

Tuesday, April 1

10:00 a.m.

March

48.0

48.3

Construction Spending

Tuesday, April 1

10:00 a.m.

March

-0.8%

-1.7%

Domestic Car and Light Truck Sales (Mln)

Tuesday, April 1

Afternoon

March

11.6

11.8

Factory Orders

Wednesday, April 2

10:00 a.m.

February

0.8%

-2.5%

ISM Nonmanufacturing Index

Thursday, April 3

10:00 a.m.

March

49.0

49.3

Nonfarm Payrolls (Thousands)

Friday, April 4

8:30 a.m.

March

0

-63

Manufacturing Payrolls

Friday, April 4

8:30 a.m.

March

-25

-52

Unemployment Rate

Friday, April 4

8:30 a.m.

March

5.0%

4.8%

Average Hourly Earnings

Friday, April 4

8:30 a.m.

March

0.3%

0.3%

Weekly Hours Worked

Friday, April 4

8:30 a.m.

March

33.7

33.7

Other reports and events

Reports

Date

Time

For

Dallas Fed Survey

Monday, March 31

10:30 a.m.

March

SPEECH: San Fran. Fed President Yellen

Monday, March 31

12:00 p.m.

Johnson Redbook Weekly Store Sales

Tuesday, April 1

8:55 a.m.

Mar. 23-29

ICSC-UBS Store Sales

Tuesday, April 1

7:45 a.m.

Mar. 23-29

EARNINGS: Best Buy

Wednesday, April 2

Micron Technology

Wednesday, April 2

Monsanto

Wednesday, April 2

Mortgage Applications

Wednesday, April 2

7:00 a.m.

Mar. 23-29

ADP Employment Data

Wednesday, April 2

8:15 a.m.

March

TESTIMONY: Fed Chairman Bernanke

Wednesday, April 2

9:30 a.m.

EARNINGS: Constellation Brands

Thursday, April 3

Weekly Jobless Claims

Thursday, April 3

8:30 a.m.

Mar. 23-29

SPEECH: Fed Governor Mishkin

Thursday, April 3

7:30 p.m.

SPEECH: San Fran. Fed President Yellen

Thursday, April 3

8:00 p.m.

EARNINGS: Family Dollar Stores

Friday, April 4