Following several weeks of losses, the dismal August

jobs report and the

Dow's

precipitous drop Friday, visions of a retest are dancing in every trader's head.

Blue-chips were hit hard in the last session of the week. The Dow Jones Industrial Average fell 234.99 points, or 2.39%, to 9605.85, while the

S&P 500

dropped 20.62 points, or 1.86%, to 1085.78. The

Nasdaq Composite

, which had already fallen about 5% on the week, was propped up by reasonably good news from

Intel

(INTC) - Get Report

, and fell just 18 points, or 1%, to 1687.70.

The selling takes the Dow and Nasdaq close to the lows they hit before rallying in early April. The Nasdaq is 48.9 points above its low of 1638.8, hit on April 4, while the Dow is 216.37 points above its low of 9389.48, reached on March 22. The S&P, meanwhile, fell through a support level and is now trading at its lowest point since 1998.

The question for the coming week is, will the indices retest those April lows? If so, will they fall below them or rebound to make a sustained move higher? To answer that question, Wall Street will be watching for third-quarter earnings preannouncements, earnings reports from

software outfits

Oracle

(ORCL) - Get Report

and

Adobe

(ADBE) - Get Report

Thursday and a few key economic reports Friday.

Mumbo Jumbo

Weekend interpretations of the jobs data should also play their part in next week's market.

"We've gotten some mixed data recently," said Charles Crane, stock market strategist at Spears Benzak Salomon & Farrell. "Portfolio managers are going to spend the weekend trying to sift through it all. There's bound to be some hand-wringing."

The jobs report seemed like a slap in the face for those who were hoping that

manufacturing had turned a corner and that an economic recovery was on the way. Unemployment jumped to 4.9% in August, its highest level in four years, a government report said Friday. Payrolls decreased by 113,000, a sharp increase from the previous month's 13,000. The Labor Department attributed the unexpected decrease in payrolls to the manufacturing sector just when industrial production and data from the National Association of Purchasing Management had begun to signal a bottom in that sector. Meanwhile, the Labor Department said the services sector, which showed surprising weakness in August according to the NAPM report, actually added jobs.

But some economists said the mixed data is a sign that the economy is bottoming. "In contrast to the spring, where most things were going down, things are mixed, so that suggests you are in some sort of bottoming process," said Stanley Shipley, senior economist at Merrill Lynch. Shipley said the NAPM is probably a better indicator of manufacturing activity than the jobs report anyway. The jobs report is a lagging indicator, so the manufacturing sector job cuts included in the August data might pertain to layoffs announced back in April and June, when the sector was still declining, he said.

Bottom or no bottom, economists were worried about the impact that media coverage of the weak jobs data might have on

consumer psychology, and at least one called for an immediate interest-rate cut.

"The psychologically damaging rise in the unemployment rate necessitates an immediate rate cut by the

Federal Reserve

," said Tony Crescenzi, chief bond market strategist at Miller Tabak.

Other market participants also put their bets on more rate-cutting. Fed funds futures, a good proxy of how much interest-rate easing the market expects from the Federal Reserve, are now pricing in 20% odds of a rate cut before the central bank's policymaking arm meets in early October.

As September progresses, earnings preannouncement season should pick up, and strategists expect to see more warnings this week. "Investors are keeping their ears open for confessions, but they want to hear as little as possible," said Crane. "From where I sit, it doesn't seem like the amount of negative guidance has accelerated, so earnings may have stabilized."

Thus far, the earnings preannouncement tally is looking only slightly better than the second quarter, according to data released by Thomson Financial/First Call. A greater number of companies have announced that they will meet estimates, but fewer companies have preannounced positively. For the third quarter, 20% are in line, compared with 16% in the second quarter. Meanwhile, 18% of preannouncements have been positive, compared with 20% last quarter. And 62% are negative vs. 64% last quarter.

Despite all the gloom, professional investors think the market may have priced in a lot of the bad news. Investors were at least willing to believe in recovery last week, so anything short of devastating from Oracle, or any good news from the retail sales or industrial production reports next week, could help.

The market rallied on the back of a positive NAPM report Tuesday and lifted stocks in extended-session trading after

Intel

gave a lukewarm outlook Thursday night.

Investors will be looking for confirmation from the August industrial production numbers that manufacturing has indeed turned. And economists are expecting to see a positive retail sales report.

"Retail sales is going to be an important number," said Paul Kasriel, chief U.S. economist at Northern Trust of Chicago. Kasriel said there shouldn't be any drag from auto or gasoline sales, so he's expecting positive data. A negative report might indicate that the consumer is caving in and would be very worrisome following Friday's jobs report.

Oracle, meanwhile, will be high on Wall Street's radar. The stock has fallen sharply in recent weeks amid concerns that it will miss estimates, so if the software maker meets or beats, Wall Street may be in the mood to cheer. On the other hand, a disappointing outlook could spin tech stocks lower.

"If Oracle comes out with good numbers, or doesn't say anything really bad, or if some other bellwether says anything like what

Cisco

(CSCO) - Get Report

said two weeks ago, if there's no shock there, we could see a rally," said Kent Engelke, capital markets strategist at Anderson & Strudwick. "The market is pretty oversold. Last week was your worst week in the market since mid-March. That suggests that a lot of negativity is already priced into it."