Wall Street buckles in for a bumpy ride

Stocks hit a bit of a snag over the past few days, and the holiday-shortened week to come won't likely help them bounce back.

"We're going to see the market get pushed around on very little volume, like a tumbleweed on the prairie," said Jack Ablin, chief investment officer at Harris Private Bank.

With only three and a half trading days next week, and with many traders away on vacation, volumes are expected to be much lower. Low trading volumes often means stocks become more volatile.

That won't be a good thing if next week's economic data is as bad as economists think it will be. Though three housing reports are expected to show very moderate improvement in sales and prices, a revised reading on the nation's gross domestic product will likely show the economy didn't grow nearly as much as the initial estimate.

"That GDP number may catch people by surprise," said Art Hogan, chief market strategist at Jefferies & Co. "It's probably going to be revised lower, and it will be very interesting to see how the market reacts to that."

The market had been taking sour economic news in stride, even surging to 13-month highs earlier in the week. Investors continued to pour money into stocks as the dollar weakened.

Federal Reserve Chairman Ben Bernanke said on Monday that he was concerned about the dollar getting hammered, but he maintained that the Fed will continue to keep interest rates low in an effort to spur economic growth. A lower dollar pushed stocks higher Monday and Tuesday, as the S&P 500 soared above the 1,100 level and the Dow Jones industrial average neared 10,500 points.

But the trend reversed on Wednesday, Thursday and Friday, as economic woes sent investors moving back into the dollar and stocks headed lower. The S&P 500 sank below 1,100 and the Dow closed just above 10,300, eking out a meager 0.5% gain for the week.

Still, experts think this recent rough patch will be just a temporary glitch, and the steep climb that has continued almost unabated since March will likely continue for the rest of 2009.
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"The correlation with the dollar has been very tight over the past week," said Hogan.

Hogan also said investors have been counting out consumers from the economic recovery, and any positive surprise in the holiday shopping season could be a huge boon for stocks.

"The consumer has gotten written off really quickly in this environment," he said. "There have been some very conservative expectations for Black Friday, and there's a real possibility for an upside surprise that will give markets a healthy boost."
The week ahead

Monday: The National Association of Realtors reports existing home sales for October at 10:00 a.m. ET. Sales of homes by homeowners are expected to have increased to 5.65 million last month from 5.57 million in September.

After the closing bell, Hewlett-Packard (HPQ, Fortune 500) will formally announce its quarterly financial results. Last week, the tech giant pre-announced those results, saying it earned $1.14 per share, excluding charges, on revenue of $30.8 billion.

Tuesday: The Commerce Department reports a revised reading of Gross Domestic Product, the broadest view of the nation's economy, at 8:30 a.m. ET. After last month's advanced GDP estimate showed the economy returned to growth at a 3.5% annual rate in the third quarter, economists believe the revised reading will show the economy grew at a rate of 3% last quarter.

Also on Tuesday, Case Schiller will report its home price index at 9 a.m ET. Economists expect the report to show prices in the 20-city index to have fallen 9.1% in September after tumbling 11.3% in August.

And a reading on the Conference Board's consumer confidence index at 10 a.m. ET is expected to show consumer sentiment slipped slightly this month to a reading of 47.5, down from 47.7 in October.

Finally, at 2 p.m. ET, the Federal Reserve will release the minutes from its Nov. 3-4 meeting, in which the central bank opted to keep interest rates steady. The minutes will also include the Fed's economic forecasts for the coming quarters and its long-term projections.

Wednesday: The day before Thanksgiving will be jam-packed with economic data reports, beginning with the Commerce Department's report on personal income and spending at 8:30 a.m. ET. Spending is expected to have risen 0.5% in October, compared to a 0.5% decrease in September. Economists predict income rose 0.2% last month after remaining flat in the previous month.

Usually announced on Thursday, the government's weekly unemployment insurance claims report will be released on Wednesday at 8:30 a.m. ET next week because of the Thanksgiving holiday.

The Census Bureau will release its monthly report on durable goods orders at 8:30 a.m. ET. Economists expect goods orders to tick up 0.5% after growing 1% in September.

A report on new home sales will also be released by the Census Bureau at 10 a.m. ET. Like existing home sales, sales of new homes are expected to have risen in October, with 414,000 sales. In September, 402,000 new homes were sold.

The government will report on crude oil inventories at 10:30 a.m. ET. Economists believe the nation's oil reserves fell by 887,000 barrels this week.

Thursday: The markets are closed on Thursday for Thanksgiving.

Friday: The stock market will close early at 1:00 p.m. ET.

Economists will be keeping a close eye on retail sales Friday. Known as "Black Friday" the day after Thanksgiving is traditionally the biggest shopping day of the year.