Coming Week: New Year, Same Problems?

The first full trading week of 2009 could mostly be a quiet one as traders return from the holiday season still licking their wounds from the previous year, but that may all change following the December nonfarm payrolls data.

The report, due Friday, is expected to show that the U.S. economy saw 475,000 jobs disappear last month, which would mark the 12th straight month of declines. When combined with the 533,000 jobs that were lost in November, the worst single-month decrease in 34 years, the expected December losses would mean the U.S. economy shed more than a million jobs over the course of only two months.

"That is a staggering number," said Chip Hanlon, president of Delta Global Advisors. "It's hard to guess if we'll get a surprise either way, but it still seems that this is still deepening. There's a better chance that the number surprises to the downside."

Even if the number is greater than a loss of 475,000 jobs, Hanlon argues the market could still rally. Following the November nonfarm payrolls report in early December, the Dow Jones Industrial Average rebounded from a 257-point loss early in the day to end higher by 259 points, a swing of more than 500 points.

"If it's a weaker-than-expected number, it has to be a lot weaker to be a driver that takes the market lower," Hanlon added. "It seems the worst-case outcome has been priced in."

The lone economic release that focuses on activity in December, aside from the nonfarm payrolls report, will be the Institute for Supply Management's services index, due on Tuesday. This past week, the ISM manufacturing index came in at 32.4% in December, the fifth consecutive monthly decline.

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