U.S. stocks face more turbulence that could send indexes spiraling through key levels this week as doubts about the global recovery's pace persist and fears linger over Europe's sovereign debt woes.

Investors worry that the debt problems will hinder efforts to sustain the nascent economic recovery and undermine confidence in the stability of governments that stand behind the euro.

With the Dow briefly dipping below 10,000 last week and the benchmark Standard & Poor's 500 <.SPX> down 7.3 percent from its 15-month closing high of January 19, money managers and analysts say there is a growing sense that the U.S. stock market's rally from the lows of March 2009 has all but run its course.

I am in a camp that believes we're in a correction. The mood has turned short-term negative, said Eric Kuby, chief investment officer at NorthStar Investment Management Corp in Chicago. The general trend for more than nine months has been for the market to rally, but now it seems as if the enthusiasm has abated, and it's hard for the market to move forward.

EUPHORIA VS REALITY

Investors had bet the start of 2010 would show that the recovery was gaining momentum, but their optimism has been met with more signs of labor market turbulence and worry over possible contagion from fiscal upheaval in Greece, Portugal and Spain.

As a result, the euro has fallen sharply against the U.S. dollar due to risk aversion, hurting stocks and the prices of global commodities. At Friday's close, the benchmark S&P 500 marked its fourth straight weekly drop, falling 0.7 percent. For the week, the Dow slid 0.6 percent and the Nasdaq shed 0.3 percent.

Wrapping up an international meeting in Canada's Arctic, European policy-makers aimed to persuade nervous markets that they have things under control by offering reassurances about debt-strapped Greece and a promise to make banks repay rescue funds.

European Central Bank President Jean-Claude Trichet said -- in a statement issued on Saturday after two days of talks by ministers and central bankers from the Group of Seven's rich industrialized countries -- that he believed Greece would meet tough new targets to reduce its budget deficit.

We expect and we are confident that the Greek government will take all the decisions that will permit it to reach that goal, Trichet said.

Wall Street will not be easily convinced.

The markets are not taking any prisoners. They're not looking at things as isolated incidents. They're looking at this as the spreading of a contagion, said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.

It's not clear at this point whether this will stop at Europe or whether the correction has run its course.

Uncertainty surrounding the Obama administration's legislative reform agenda for the banking and healthcare sectors has increased the bearishness, along with uneasiness about the United States' own ballooning fiscal deficit.

There are also signs that China is looking to curb lending to prevent its economy from overheating, which risks derailing the global recovery if stimulus is withdrawn too soon.

The U.S. government's non-farm payrolls report sowed even more caution on Friday as it showed the economy unexpectedly lost 20,000 jobs in January.

BRING ON THE BARGAIN HUNTERS

All told, the correction was long anticipated, but there is uncertainty about how far it will go. The technical damage from the market's latest swoon briefly drove the Dow below 10,000 on Thursday and Friday, but the index has yet to close below that level.

Meanwhile, the S&P 500 has broken through key support at 1,085, and it fell as low as 1,044.50 on Friday before rebounding slightly toward the close.

Market technicians have warned that further downside could take the S&P 500 as low as 1,036 -- a level that will signify the textbook 10 percent correction from the January 19 closing peak.

But if the previous pullbacks -- in July and in October 2009 -- are any indication, investors could again look for opportunities in the days ahead to scour the market for stocks whose prices have been pushed down to attractive levels. Late on Friday, there was some evidence of investors snapping up beaten-down shares as technology and materials sectors led a last-minute bounce.

When everything is too bleak, that's when you should look for the other side, said Ron Florance, director of asset allocation and strategy for Wells Fargo Private Bank in Charlotte, North Carolina. Corrections are like diets. They're never really pleasant, you kind of dread them, but at the end of the year, you look better and you feel healthy.

The highlight on the economic calendar will be the Commerce Department's January retail sales report, due on Thursday, along with December business inventories and weekly jobless claims. The Reuters/University of Michigan survey of consumer sentiment will give a preliminary reading for February on Friday. For details, see

Particular attention will be paid to Federal Reserve Chairman Ben Bernanke's testimony, scheduled for Wednesday, before the House Financial Services Committee. The hearing will explore the unwinding of the Fed's emergency programs.

The steady stream of earnings will continue, with the focus shifting to more consumer-oriented companies, including Walt Disney Co , Coca-Cola Co , CVS Caremark Corp , PepsiCo
, Marriott International , Hasbro and Electronic Arts among those set to report.

The consumer's financial health is key as investors look for clarity on the recovery's prospects. For a full earnings diary, see

(Reporting by Ellis Mnyandu; Additional reporting by Leah Schnurr; Editing by Jan Paschal)

(Wall St Week Ahead runs every Sunday. Questions or comments on this column can be sent via e-mail to: ellis.mnyandu(at)thomsonreuters.com)