Coming Week: Job Jitters

Stocks, headed for their fifth straight year of gains, will enter 2008 facing an uncertain jobs report that promises to dictate whether the opening bars of the new year will be a recession dirge or a gospel song of revival.

"Friday's jobs report will be critical for the market because it's a total wild card at this point. Nobody really knows what to expect," says Paul Mendelsohn, chief investment strategist with Windham Financial Services.

"If it's weak, that could confirm that the bears are right and we're entering a recession as a result of this housing mess and credit crisis," he continues. "If it's strong, that may mean our worst fears from all this aren't materializing and the stock market is dodging a bullet."

Even with modest gains in the major stock indices, 2007 will be remembered as a year of turmoil for financial markets as a sharp downturn in the U.S. housing market brought on a spike in foreclosures on risky mortgage loans, making billions of dollars of securities held by major financial institutions on Wall Street worthless or nearly so.

With their confidence shaken, investors are either looking for an end to the calamity in early 2008 or a sign that last year's mayhem was only the beginning. Before Christmas, Pimco founder and CEO Bill Gross raised eyebrows by telling the Financial Times that the U.S. economy already hit a recession in December.

Now, the upcoming employment report from the federal government will put his controversial thesis to the test.