Concerns about a war with Iraq and its effect on the U.S. economy will continue to drive stocks in the week ahead, market watchers said.

"People are going to be reluctant to commit too much money in the face of potential conflict in the Middle East," said Charlie Crane, a money manager at Spear Benzak Salomon & Farrell.

While it doesn't look as though the U.S. will go to war with Iraq next week, investors are beginning to sense that an attack is imminent. U.S. Secretary of State Colin Powell said Friday he wanted the Security Council to vote, possibly as early as Tuesday, on a revised draft resolution giving Iraqi leader Saddam Hussein until March 17 to disarm or face war.

Chief weapons inspector Hans Blix said the Iraqis have been more cooperative recently, but that the U.N. needs more time to complete its work. France, Russia and China aren't expected to back the joint resolution from the U.S., Britain and Spain. The U.S. has said it is prepared to act without the U.N.'s support.

"I think we'll continue to drift. I haven't seen much in the way of panic selling; it's more of a buyer's strike," said Jeffrey Kleintop, chief investment strategist at PNC Advisors. "Investors have probably established the positions they want to be in ahead of the war."

Still, Paul Macrae Montgomery, a technical analyst who writes the newsletter

Universal Economics

, believes the market will break below its October low "sometime within the next two weeks." He noted that the

New York Stock Exchange

advance/decline line took out its October low in early February and that the major averages will soon "catch up."

"People think the market will go up as soon as we invade Iraq, so they're hesitant to sell, but once we break the October lows, that will scare people and the technicals will be oversold enough for us to put in a worthwhile bottom," he said.

The onset of the earnings confessional season could prove to be another head wind for the market in the coming week. Last Thursday,

Intel

(INTC) - Get Report

said it expects first-quarter revenue of between $6.6 billion and $6.8 billion, while analysts were looking for $6.75 billion. The firm said sales of flash memory have been weaker than expected, sending shares down 4%.

Still, Kleintop said the market is unlikely to be flooded with negative preannouncements just yet. "The thought is we may get a war in mid- to late March, so that could have a significant impact on trying to close deals at the end of the quarter," he said. "We may have a lack of announcements for that reason, but that's not necessarily a good thing."

Among companies actually reporting earnings next week are

Bristol-Myers Squibb

(BMY) - Get Report

on Monday,

Ann Taylor

(ANN)

on Tuesday and

Borders

(BGP)

on Wednesday.

Investors also will be paying close attention to the economic data after a dismal unemployment report Friday. The economy shed 308,000 jobs in February, which some economists said raises the odds of a

Federal Reserve

rate cut on March 18.

The most significant data will come later in the week with the release of retail sales. Economists expect that sales fell 0.2% in February after falling 0.9% in January. Retail sales, which will be released on Thursday, are particularly important because consumer spending accounts for two-thirds of the U.S. economy. If spending faltered in February amid higher unemployment, weak stock prices and fears of war, talk of a double-dip recession will grow louder.

Also on Thursday, weekly unemployment claims and the producer price index will be released. The PPI is expected to rise 0.7% after climbing 1.6% in January. Industrial production and the University of Michigan Consumer Sentiment survey are both slated for Friday. Earlier in the week, investors will watch for wholesale inventories and the trade balance.

A number of Federal Reserve officials also are scheduled to speak in the week ahead, and while they're not expected to discuss monetary policy, investors will be listening for any clues about the next move on rates.

On Monday, St. Louis Fed President William Poole is expected to speak at the Office of Federal Housing Enterprise Oversight conference in Washington. Chicago Fed President Michael Moskow will make introductory remarks on globalization before the local Council on Foreign Relations on Wednesday. Fed Governor Mark Olson and Kansas City Fed President Thomas Hoenig are due to speak about community banking in Chicago on Thursday and Friday, respectively.