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In a shortened holiday week with little economic or earnings news to speak of, investors could be in for some quiet trading over the next few sessions.

Unless, of course, concerns about oil prices or the dollar start to escalate.

Last week, the dollar fell against the yen to its lowest level in more than four years and was sitting at record lows against the euro, as traders worried that swelling deficits could prompt overseas investors to pull money out of U.S. assets.

In a speech Friday,

Federal Reserve

Chairman Alan Greenspan warned that foreign demand for U.S. stocks and bonds would inevitably wane if U.S. debt continued to pile up. In order to attract capital from abroad, he said, the Fed could be forced to raise interest rates.

"Obviously, alarm bells are going off now that the Fed is going to have to be more aggressive than we thought if the dollar continues to fall," said Peter Cardillo, chief market strategist at S.W. Bach.

Stocks fell sharply on Friday, sending the


down 0.8% for the week to 10,459 and the


down 0.7% to 2071. The

S&P 500

fell 1.2% to 1171. The declines followed several weeks of gains.

Concerns about the huge trade deficit aren't new. Indeed, the Fed said in the minutes of its June policy meeting that outsized deficits cannot be sustained indefinitely. While the adjustment of imbalances "might well proceed in a relatively benign fashion" and isn't necessarily imminent, the possibility of more "

wrenching changes could not be ruled out," it said.

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Some analysts worry that the market could be facing a replay of 1987, when large deficits, a falling dollar and higher interest rates contributed to an enormous decline in stocks. In the first two weeks of October 1987, both the Dow and S&P 500 fell over 30%, with most of those losses coming on "Black Monday."

Still, Cardillo said he doesn't expect the same thing to happen this time around, noting that stocks haven't been in a sustained bull market over the past five years as they were prior to the crash 17 years ago.

Meanwhile, others say that computer systems are more efficient today than they were back then. The

New York Stock Exchange

has also imposed restrictions on some forms of program trading that would prevent the kind of panic selling that took place at that time.

Jay Suskind, head of institutional equity trading at Ryan Beck & Co., said he isn't too concerned about the dollar's decline. While it could force the Fed to tighten more aggressively, interest rates are currently sitting at historically low levels, and increases have already been priced in.

"It's not a secret that rates are going higher," he said. "The dollar decline and higher oil prices could create some havoc, but overall I don't see things playing out that way again."

Crude oil futures on the New York Mercantile Exchange jumped more than $2 a barrel on Friday to $48.89, as traders said supplies of heating oil are tight ahead of what could be a cold winter in the U.S. and Europe.

"We've got oil prices going through the roof again, and if that continues, we'll probably have a cautious market next week," said Cardillo.

Volume should remain light, however, with many investors getting out of the market by Wednesday ahead of the Thanksgiving holiday on Thursday. The bond market will close at 2 p.m. ET on Wednesday and Friday, and the stock market will be open for a half day on Friday.

While most companies have already reported earnings for the third quarter, several firms will release results next week, including

Krispy Kreme



Campbell Soup

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on Monday and

Analog Devices

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(DE) - Get Deere & Company Report




on Tuesday.

Investors will also be keeping an eye on the economic data. A fifth straight decline in the Conference Board's leading economic indicators and a flattening in the yield curve suggest to some economists that growth will slow down over the next two quarters. But that view is by no means unanimous, and data on employment, industrial production, housing and inflation have given economic bulls a reason to cheer.

On Tuesday, data on existing-home sales will be released, followed by new-home sales, durable-goods orders, the Conference Board's help-wanted index and the University of Michigan's consumer sentiment survey on Wednesday.

The sentiment survey for early November is expected to rise to 96 from 95.5, and the help-wanted index is expected to rise to 37 fro 36.