Wall Street could have another rough week if economic data--especially Friday's unemployment report--offers more signs that the U.S. is on the brink of recession.
With a full slate of Federal Reserve officials, including Fed Chairman Ben Bernanke, due to speak on the economy and monetary issues through the week, volatility could be the rule.
Strikingly weak economic figures, including reports on Friday that suggested consumer spending has ground to a halt and another showing consumer sentiment sank to a 16-year low in February, have heightened recession fears.
If there is any solace in the coming week for Wall Street, analysts say it would have to come from the slew of economic reports on tap, including readings on the manufacturing and the vast services sector.
"This market is extremely hypersensitive to economic news, good and bad," said George Yared, founder and chief investment officer at Yared Investment Research in Wayzata, Minnesota.
"Anything that doesn't have a minus on it will be good news for the market," he said.
While investors may try to shrug off bad news in the hope that a spate of Fed interest-rate cuts will ease the drag of the housing slump, any optimism will fade quickly if signs point to further credit losses for the sector.
Progress in the effort to stabilize bond insurers, which face the threat of credit ratings downgrades, is also seen as critical for the financial sector, whose impact could further
harm the banking sector and fuel more write-downs for mortgage-related losses.
On Friday, CNBC reported that a bailout plan for Ambac Financial Group, had hit a snag. Moody's Investors Service also said ratings on the insurance arm of Ambac Financial Group remain on review for a possible downgrade and the insurer is around $2 billion short of its "target" capital level for an 'AAA'-rated company.
"There could be more shoes to drop" in terms of financials, said Russell Croft, portfolio manager at Croft Funds Corp in Baltimore, Maryland.
"Stability is what we'd like to see. If the unemployment numbers can stay pretty down ... we really think it will help get us back in shape going forward," he said.
In trading Friday, the Dow Jones industrial average slid 315.79 points, or 2.51 percent, to end at 12,266.39. The Standard & Poor's 500 Index fell 36.96 points, or 2.70 percent, to 1,330.72 while the Nasdaq Composite Index closed down 60.09 points, or 2.58 percent, to end at 2,271.48.
For the month, the Dow dropped 3 percent, and the S&P fell 3.5 percent, bringing its losses since markets peaked in October to about 15 percent. The Nasdaq dropped 5 percent for
For the week, the the Dow was down 0.9 percent, the S&P was down 1.6 percent and the Nasdaq was down 1.4 percent.
On Monday, investors will watch for the Institute for Supply Management's (ISM) February reading on manufacturing, followed on Wednesday by the services sector ISM for last
month, January factory orders.
Also on Wednesday, investors will comb through a private employment survey due for release by ADP Employer Services. The government's closely-watched employment report for February is scheduled for release on Friday.
January pending home sales are due for release on Thursday, along with weekly jobless claims.
Factory orders and the non-manufacturing ISM survey "will give us an idea of how high the inflation levels have gone overall and the probabilities of further rate cut," said Joe Kinahan, chief derivatives strategist at online brokerage firm thinkorswim Inc in Chicago.
Retailers will also be in focus with major U.S. chains, including Wal-Mart Stores Inc due to post monthly sales on Thursday. The earnings diary includes Staples Inc, tax preparer H&R Block Inc and Costco Wholesale Corp.
Among a busy slate of Fed speakers next week, Federal Reserve Bank of Philadelphia President Charles Plosser speaks on Monday before the National Association for Business Economics.
On Tuesday, Fed Chairman Bernanke is scheduled to speak at an event in Florida on "Reducing Preventable Mortgage Foreclosures," before the Independent Community Bankers of America (ICBA) National Convention and Techworld.