Friday's news of a buckling U.S. job market sent stock investors running for the exits, and this week promises to be no less stressful as investors grapple with the increasing possibility of an economic recession.
The weekend will also give investors time to reflect on news U.S. employers cut payrolls by 4,000 jobs last month.
However, it is unlikely that there will be much clarity ahead of the anxiously awaited Federal Reserve interest-rate decision in the coming week, as investors debate whether and by how much the Fed will cut key interest rates.
The pendulum is going to swing between the euphoria -- we're going to get a rate cut, things are not that bad -- to the world is going to end, we're going into a recession, said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.
The Dow Jones industrial average fell 249.97 points, or 1.87 percent, to end at 13,113.38. The Standard & Poor's 500 Index was down 25.00 points, or 1.69 percent, at 1,453.55. The Nasdaq Composite Index was down 48.62 points, or 1.86 percent, at 2,565.70.
The Dow was down 1.8 percent for the week, while the S&P 500 was 1.4 percent lower and the Nasdaq was down 1.2 percent. For the S&P, it was the worst week since the beginning of August, while the Dow had its worst week since the week ending July 29.
New economic data will be studied warily for more signs the housing slump and subprime mess is spreading into other sectors of the economy.
People will be nervous about all economic releases, because Friday's jobs number showed that perhaps things are getting worse quicker than the market had previously believed, said Eric Kuby, chief investment officer at North Star Investment Management Corp. in Chicago.
The sixth anniversary of the September 11 attacks may also trigger some market unease, especially after al Qaeda leader Osama bin Laden said in a video seen by Reuters on Friday that the United States was vulnerable despite its military and economic power.
Trading volume, which has suffered from summer vacation-induced thinness in recent weeks, will likely jump as market participants return to their desks. Defense stocks are expected to benefit as investors rejig their portfolios on the mounting evidence of a slowdown, analysts said.
As people return they are going to be shifting to recession-resistant names such as health care, defense contractors and consumer staples, said Thomas Nyheim, vice president at Christiana Bank & Trust in Greenville, Delaware.
Among the economic data likely to garner market attention are initial jobless claims, consumer confidence, retail sales and industrial production.
As Federal Reserve Chairman Ben Bernanke said in a speech last week in Jackson Hole, Wyoming: We will pay particularly close attention to the timeliest indicators.
Weekly jobless claims data, due on Thursday, could be more significant than usual as investors look for clues on whether the weak employment trend is here to stay.
And if Friday's industrial production numbers come in lower and add to recession fears, Wall Street could see another negative turn, Christiana's Nyheim said.
Industrial production for August is forecast to rise 0.3 percent, while capacity is pegged at 82 percent, a Reuters poll showed.
But on the other hand, U.S. retail sales, which have so far benefited from the back-to-school rush, may help calm the market, Nyheim said. Retail sales and consumer confidence data, both due on Friday, will be scrutinized for clues about how the U.S. consumer is faring.
Retail sales, excluding autos, are expected to rise 0.3 percent in August, the Reuters poll showed. September's Reuters/University of Michigan consumer confidence data is expected to hold steady at 83.4.
In an otherwise sparse corporate calendar, a highlight is fast-food chain McDonald's Corp's August same-store sales scheduled for Tuesday, which could also shed light on the health of the consumer.
There are no major earnings scheduled for this week, but with major investment banks due to report third-quarter results the week of September 17, investors will be watching out for any early warning signs or pre-announcements that those earnings could come in even lower than analysts' already low expectations.
More broadly, economic data suggesting slower growth has been too recent to show up in earnings estimates for the third quarter, said Ashwani Kaul, senior research analyst at Reuters Estimates, a unit of Reuters Group Plc.
Earnings for companies in the Standard & Poor's 500 Index are expected to grow 3.7 percent in the third quarter, down slightly from last week's 3.8 percent, according to Reuters Estimates.
(Additional reporting by Herbert Lash)