The economic data Thursday will be watched for what it might mean to the Fed. Claims are expected to be the same as last week, at 270,000, and retail sales, released at 8:30 a.m., are expected to be up 0.6 percent. Without autos, sales are expected to rise 0.4 percent and core is expected at 0.45 percent. Import prices are also released at 8:30 a.m., and business inventories for June are expected at 10 a.m.  "We're actually looking for a pretty good number mainly because of the solid auto sales report," said Michael Gapen, chief U.S. economist at Barclays of the retail sales number. "The headline is mainly driven by the solid increase in both core sales and motor vehicle sales."  "Auto manufacturing did 17.5 million units and that we think should carry over into retail sales," Gapen said, adding gasoline sales should be slightly lower.  Read MoreThis could be correction stocks are waiting for  Gapen said he does not expect the retail sales to be a factor for the Fed. "I think they will discount retail sales just broadly as an indicator. I think the auto sales number is more indicative for them," he said, noting the Fed is more interested in employment data and inflation.  Gapen said the fallout from China is not enough to change the Fed's course at this point, and he expects a September rate hike. The futures market, however, shifted bets away from September, and the odds of a rate hike in September fell below 50 percent from Friday's 56 percent.  Peter Boockvar, chief market analyst at Lindsey Group, said the market is coming to grips with a view of the Fed hiking in September. "We're at a point where the Fed collected a lot of data and I don't expect much to change in the next month and a half to affect them either way…. I don't think it's the beginning of rate hike at every meeting. We're going to get barely any hikes. I think the market is sniffing out right now that even if they raise in September, it's not the start of an aggressive cycle."
Markets switch their focus to U.S. matters Thursday, with fresh reports on July retail sales, business inventories and weekly jobless claims.