Forget a Santa Claus rally. Investors might just want to hold onto their hats.
Because if the past few days are any indication, stocks could be in for another choppy week.
"It's unfortunate, but we're going to see a lot of volatility for the last month of the year because we've had such a good year," said Arthur Hogan, Jeffries Managing Director, appearing Friday on CNBC's "Street Signs." "There's going to be a lot of nervousness around economic data."
Worries about an economic slowdown weighed heavily on the markets Friday, especially after a report of unexpected weakness in the manufacturing sector. On top of that, Federal Reserve officials were out in force, warning about the dangers of inflation and the possibility of higher interest rates.
It's no wonder, then, that stocks tumbled Friday after seesawing for much of the week.
The Dow Industrials Industrial Averageand the S&P 500 posted their second straight weekly losses, while the Nasdaq suffered its worst week since July 15th.
This week, investors will be looking closely for more signs of a slowing economy--and even more commentary from the Fed.
Exclusive Interview of Moskow
On Monday, Chicago Fed President Michael Moskow-who roiled the markets on Friday with talk of inflation and higher rates--will sit down with CNBC's Steve Liesman for an exclusive interview on cnbc.com. The interview will air live on the revamped website at 9 am New York time.
There also will be some important economic indicators out later in the week.
On Tuesday, the government will report on third-quarter productivity, a widely watched indicator.
"The productivity number is important, especially when you have low unemployment," Marc Pado, U.S. Market Strategist for Cantor Fitzgerald told cnbc.com. "If productivity starts to fall, your unit labor costs go up or stay very high. These costs can end up being passed on to the consumer in inflation, which we haven't really seen, or it can cut into profitability."
Also on Tuesday, the Institute for Supply Management will issue its survey of business activity in the services sector. It was the ISM's report on Friday of a surprise drop in manufacturing that sent stocks skidding. So this report is likely to garner more attention than usual.
"The services report is critical," said John Lynch, Chief Market Analyst at Evergreen Investments, appearing on CNBC's "Squawk on the Street." "Investors need to appreciate the fact that services make up 80% of the economy."
Then on Friday is the unemployment report for November as well as the University of Michigan survey of consumer sentiment. These will be the last key indicators before Fed policymakers meet on Dec. 12 to decide the direction of interest rates.
Though most analysts expect the Fed to leave rates unchanged at that meeting, the lastest rumblings from Fed officials about inflation have clearly got investors worried.
Many experts think the market was due for a pullback anyway. Last week's decline came after the Dow Industrials posted gains five months in a row, the S&P 500 rose six months in a row and the Nasdaq Composite rose four months in a row.
Looking for Opportunity
Some analysts see Friday's downturn as a buying opportunity.
"Don't take this as an indication of where stocks are headed in the coming months," said Jeff Kleintop, Chief Investment Strategist for PNC Wealth Management, appearing on CNBC's "Street Signs." "This is not a sign of recession, but a sign that we have finally entered that soft landing environment, which means the Fed is close to easing and that's good news for equities."
"We think the economic softness we're in now will prove temporary and that industrial stocks and technology stocks will do particularly well," said Charles Crane, Managing Member of Scotsman Capital Management, appearing on CNBC's "Closing Bell."
Treasury prices rose sharply on Friday in reaction to signs of a slowing economy. That sent the yield on the benchmark ten-year note down to a 10-month low.
The dollar declined against all of its major rivals. The dollar hit a 14-year low against the British pound. The euro hit a 20-month high breaking through the $1.33 mark.
November motor vehicle sales were also released Friday. Overall, U.S. car sales for the month are estimated to have risen to 5.3 million from 5.1 million in October, while November light truck sales are estimated to have risen to 7.3 million from 7.2 million. Ford Motor sales fell 10.0%. Sales at Chrysler rose 3.0%. General Motors
reported an increase in November sales of 5.8% with light trucks rising 16.6%.
Crude oil climbed back above $63 a barrel on Friday after Saudi Arabia's oil minister said deeper production cuts are needed to offset high fuel stocks in the U.S.
Boeing was the best performer on the Dow for the month of November.
General Motors was the worst performer on the Dow in November.
Europe Falls; Nikkei Posts Gain
After trading higher early in the session, European stocks fell on Friday's weak U.S. manufacturing report.
Germany's DAX, the FTSE-100 in London and the Paris CAC-40 all closed lower.
Asian stocks finished mixed, though Japan's Nikkei closed higher after investors bought property shares on the back of weaker-than-expected inflation data. Taiwan's TAIEX also inched up but Hong Kong's Hang Seng Index and Australia's S&P/ASX 200 fell from recent highs.