The market will have to wake up if it wants to make it to the traditional year-end party this December.

Next week is the start of what's historically one of the market's strongest months. But some worry that the year-end rally arrived a month early this year, and that after rising steadily through mid-November, the indices' gains are petering out

The first key economic readings on November, due next week, will test the rally's staying power. That data will set the tone for the last

Federal Reserve meeting of the year, on Dec. 11, from which most pros are now expecting a quarter-point interest-rate cut.

"The rally should be petering out soon if it hasn't started to do so already," says Thomas Van Leuven, market strategist at J.P. Morgan. "Next week will be an important test. It will confirm whether that view is right. If we see November weakness in those indicators, that would send a strong signal that fourth-quarter earnings are likely to be weaker than we're currently expecting," he said. "That could cause some weakness in stocks."

On average, analysts are forecasting a 17.8% drop in fourth-quarter earnings for the

S&P 500, according to First Call consensus polls. But First Call's Joe Cooper expects that number to grow to a 22% decline as analysts continue to revise estimates downward.


Charles Pradilla, chief investment strategist at SG Cowen, says the market won't go down but is unlikely to go up either. "The market is basically fast asleep," he says. "It has good support, but it's not cheap enough, nor is there enough evidence of recovery, to get it out of this comatose condition." Pradilla was encouraged that the market was able to shrug off weak data on Chicago-area manufacturing, released Friday. "It's showing by its resilience that no matter how bad it gets, it believes in a recovery in the second half of next year."

Pradilla doesn't expect moves of more than 5% in either direction on any of the indices between now and Dec. 25, though the range could be somewhat wider on the

Nasdaq because of increased volatility.

What next week's data say about the economic slowdown is probably more important than what they say to the Fed. After 10 rate cuts this year, recent moves have begun to have less influence on the market. "The FOMC meeting doesn't matter," says Pradilla. "What's an extra 25 basis points? You'll get a move on that day, but that has nothing to do with what this market really needs."

The November

employment report Friday is the week's biggest release. After giant losses in September and October, economists want to see whether and by how much the pace of job losses slowed. Joblessness also has a major impact on consumer spending, which hasn't crumbled yet and could be a swing factor in this recession.

After falling for a month, the pace of new jobless claims shot back up in the week ended Nov. 24, to 488,000. The median forecast among economists is for a drop of 200,000 in payrolls for November and an increase in the unemployment rate to 5.5%. Last month, payrolls plunged by 415,000, lifting the unemployment rate to 5.4%, its highest level in five years. The payroll decline was the biggest monthly loss of jobs since May 1980.



National Association of Purchasing Management index, or NAPM, due Monday, and

factory orders, due Thursday, will provide a glimpse into the moribund manufacturing sector for November. Economists are expecting the NAPM to rise to 41.9, from 39.8 in October. A reading under 50 indicates contraction. Economists were forecasting that factory orders grew 1% vs. a 6.2% decline the previous month.

Recent data on manufacturing have been mixed. The Chicago Purchasing Managers' Index, which is often a good predictor for the NAPM and was released Friday, showed significant weakness. On the other hand, new orders for durable goods, such as washing machines and airplanes, were very strong in October. Defense orders played a big role in boosting total orders, though ex-defense still grew a healthy 5.6%.


chain store sales, due Thursday, meanwhile, will close the book on consumer spending for the month, which has looked mostly strong in weekly reports. "More than the confidence measures and outgrowth from unemployment, we're looking at how remarkably well the consumer has reacted," says Jeff Hall, managing economist at IFR/Thomson Financial. "Confidence may be shaken, but they're still spending. The other threat was that a runup in October retail sales, including a meaningful gain in ex-autos, would borrow from future months, but we haven't seen evidence of that so far in the weekly snapshots," he said.