Wall Street faces a historic shake-up next week as General Motors, a pillar of American industry, heads into bankruptcy, but the market could advance further if economic data signals the worst of the recession has passed.

Stocks could also get a boost if commodity investors see more signs of a recovery in demand as it would boost profits and share prices of resource companies, and particularly the oil industry.

Though the markets closed out May with a third straight month of gains, the longest monthly winning streak since the fall of 2007, the broad S&P 500 appears stuck in a range around the 900 level.

Action in the foreign exchange market and turmoil in U.S. government bonds could undermine the S&P 500, however, as it tries to keep a grip on the nearly 36 percent gain accumulated since diving to 12-year lows in March.

If you have a return to some level of growth, with some moderate inflation, that would be the most positive scenario for equities and you could see more of a rally, said Sasha Kostadinov, portfolio manager and research analyst at Shaker Investments in Cleveland, Ohio.

Analysts said a GM bankruptcy was unlikely to have much of an impact on the market in itself -- the once mighty automaker's shares have plunged below $1, making its weight less influential.

Nonetheless, the bankruptcy will likely have ripple effects on the broader economy, particularly through job losses.

GM's stock is widely expected to be removed from the venerable Dow Jones if it files for bankruptcy. Speculation on what company might take its place on the 30-stock index ranges from Google to Goldman Sachs to Monsanto .

Stocks have been unable to put together a significant advance in the last few weeks. The dollar hit a five-month low against major currencies worldwide and certain world markets reached highs for 2009, but the appetite for risk has, of late, not translated into substantial gains in U.S. equities.

That may be, in part, due to rising bond yields, as investors have grown concerned about the increased need for borrowing by the U.S. government.

All eyes will be on Federal Reserve Chairman Ben Bernanke when he addresses lawmakers in Congress on Wednesday as investors will be looking for signals of the Fed's thinking on the recent surge in the supply of U.S. government debt.

Investors are worried that if bond yields rise to make the huge amounts of government debt attractive, it will make it harder for companies and consumers to recover.

Market-watchers will be looking for more reasons to be optimistic in this week's economic data, which includes unemployment and the closely-watched nonfarm payrolls report. Readings on the manufacturing and services sectors are also on tap.

Next Friday's data is expected to show unemployment rose to 9.2 percent from 8.9 percent the month before, according to Reuters data. Analysts say unemployment is expected to increase even as the economy starts to turn around as companies remain reluctant to hire.

There still seems to me to be a second shoe to fall on the effect of unemployment, said Carl Birkelbach, chairman and CEO of Birkelbach Investment Securities in Chicago.

But economic hopes could be dampened by the double-edged sword of higher commodity prices and worries over the impact of higher interest rates.

We start to put additional pressure on the consumer by virtue of higher gasoline prices and higher borrowing costs. I think it threatens at least the timing of the recovery, said Craig Peckham, equity trading strategist at Jefferies & Co in New York.