The rally in U.S. stocks, which stumbled in recent days on worries about the economic recovery and continued government stimulus, will be tested this week by crucial data on growth and jobs.
Investors are set to pore over September non-farm payrolls, the final reading of second-quarter gross domestic product and several other big economic reports.
The data comes amid signs the rally in stocks, which has lifted the Standard & Poor's 500 index <.SPX> some 54 percent since early March, could be fizzling out.
The market suffered three straight days of losses last week and the S&P put in its biggest weekly drop since early July, with data on Friday showing new orders for long-lasting U.S. manufactured goods falling by their biggest margin in seven months.
This week the focus likely will be on Friday's monthly U.S. government jobs data. The 9.7 percent U.S. unemployment rate is a major concern for investors because of the impact on the economy and, in particular, consumer spending.
It's a big deal every time, because it's really one of the most sensitive indicators, said Cummins Catherwood, managing director at Boenning and Scattergood in West Conshohocken, Pennsylvania.
This is right where the rubber meets the road: Do I have a job or don't I? he said.
End-of-quarter positioning also could provide some lift to stocks, as fund managers move money out of bonds and into equities, analysts said.
Investors also will watch Federal Reserve Chairman Ben Bernanke, who is scheduled to speak on financial regulatory reform before a House of Representatives panel on Thursday.
A LOSING WEEK
For last week, the S&P 500 fell 2.2 percent, the Dow Jones industrial average <.DJI> dropped 1.6 percent and the Nasdaq <.IXIC> declined 2 percent.
On Thursday, stocks slid as world central banks said they would scale back infusions of U.S. dollars into their banking systems. That came a day after stocks sold off following the Fed's decision to slow purchases of mortgage debt.
But the S&P 500 is still on track for gains of about 14 percent this quarter and that would follow gains of 15 percent in the previous quarter.
People are still underweight in equities, and after a big surge, they're going to try to be playing catch-up, said Fred Dickson, market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
For Friday's report, a poll of economists by Reuters showed a loss of 180,000 non-farm jobs, which would be an improvement from a decline of 216,000 jobs in August. But the unemployment rate is seen rising to 9.8 percent.
Dickson said an increase in overtime hours should also be watched as that could suggest a positive trend.
It's a very early indicator of a turn, he said.
Final second-quarter GDP data also is on tap for Wednesday, and investors will be anxious to see if the report shows any downward changes from the prior estimate of a 1.0 percent contraction.
The market will not take kindly to downward revisions of GDP next week, said David Dietze, chief investment officer of Point View Financial Services in Summit, New Jersey.
Also expected this week are data on home prices from S&P/Case-Shiller, consumer confidence from the Conference Board and factory activity from the Institute for Supply Management.
(Additional reporting by Ellis Mnyandu; Editing by Kenneth Barry)