NEW YORK (
) -- U.S. investors will return from the Thanksgiving holiday weekend to face continued uncertainty over Europe's debt crisis.
Because investors worry the worsening crisis could drag down the world economy, headlines from Europe next week are likely to overshadow a raft of economic data slated for release in the U.S., including the monthly government employment report.
Since spiraling into chaos in the early summer months, Europe's debt crisis has confounded policymakers' attempts at containment.
As Americans were gorging on deep-fried turkey and stuffing on Thursday, European officials from Italy, Germany and France were busy shooting down proposals that might have helped put the eurozone on the path toward fiscal stability.
Among the rejected proposals was the creation of eurozone bonds. Meanwhile, European Central Bank policymaker Jose Manuel Gonzalez-Paramo said eurozone nations should not rely on the central bank to resolve the debt crisis, confounding observers who contend more ECB action is needed.
By Friday, Italy was forced to pay record interest rates at a government bond auction in order to raise a planned 10 billion euros. Italian 10-year bond yields rose to 7.32%, considered too high to be sustainable. Economists are doubtful that Italy, which faces a debt pile equal to 120% of its gross domestic product, will be able to escape trouble purely through fiscal austerity measures.
Pessimism surrounding Europe's debt dilemma remains persistent, with analysts anticipating a worsening of conditions next week. A report from Barclays Capital on Friday predicted Europe would slip into a recession in the fourth quarter as Italy and Spain were forced to seek financial aid from outside sources to prevent a collapse.
aid is unlikely to be the big 'bazooka' the market is hoping for," said the report. "Ultimately, whether a solution is reached largely depends on developing a more coherent vision of the post-crisis landscape."
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Investors will get a new round of domestic economic data to parse in the coming week to weigh against Europe's intractable debt woes. Estimates on everything from housing to manufacturing activity and employment indicate that investors should expect more of the middling economic performance they've seen in recent months.
Things kick off Monday with a Census Bureau report on new-home sales for October. According to estimates from Thomson One Analytics, new-home sales are expected to increase slightly to a 315,000-unit annual rate vs. September's 313,000 clip.
Tuesday brings readings on home prices and consumer confidence. The S&P/Case-Shiller home price index for September is expected to fall 3% year over year but inch up 0.1% month over month, according to estimates from Thomson One. The index rose 0.2% between July and August, with half of the 20 cities covered by the survey reporting an increase in home prices.
The Conference Board's monthly consumer confidence index will be another closely watched metric. Consumer confidence is expected to improve to a reading of 44 after sinking to 39.8 in October. That decline put the index back at lows last seen during the recession of 2008-2009.
Wednesday kicks off the week's readings on the labor market, beginning with Automatic Data Processing's private-sector employment report for November. Economists expect to see that companies added 130,000 jobs during the month, up slightly from the 110,000 added in October. ADP characterized employment trends in October as "moderate, and probably below a pace consistent with a stable unemployment rate. This rate of moderate job creation reflects the sluggish pace of GDP growth exhibited earlier this year."
Wednesday will also bring readings on manufacturing activity in the Chicago region. The Institute for Supply Management Chicago's purchasing managers index is expected to come in at a reading of 58.2 for November compared with 58.4 in October. Readings of more than 50 indicate economic expansion, while readings of less than 50 show contraction.
Housing will again come into focus with the National Association of Realtors pending home sales index. Economists expect to see a 1.5% increase according to Thomson One in October after home sales fell 4.6% in September.
Also on Wednesday, the
will issue its report on economic conditions, referred to as the Beige Book. The report relies on anecdotal evidence to paint a picture of current economic conditions.
On Thursday, the government will issue its weekly a report on initial jobless claims. The number of Americans filing for unemployment benefits is expected to dip to 390,000 from a revised 391,000 the previous week.
Also Thursday, the Institute for Supply Management will issue its report on economic activity in the manufacturing sector for November. The survey's index is expected to rise to 51.5 from 50.8 in October, which would mark a 28th consecutive month of improvement.
Construction spending in October is expected to have ticked up 0.3%.
The week's economic data dump will finish off on Friday with the government's monthly jobs report. Economists expect the Labor Department to report that the economy added 135,000 jobs in November after adding 80,000 jobs in the previous month. The unemployment rate is expected to hold steady at 9%.
Despite the seemingly pervasive pessimism plaguing market sentiment, some analysts see cause for optimism. Craig Callahan, president of investment management firm Icon Advisors, believes the European debt crisis and the U.S. budget deficit talks will both find favorable resolutions.
"We were surprised that the October rally fizzled in November," said Callahan. "We think the one-two punch (Europe then the U.S.'s attempt to reduce the deficit) has people worried and distracted." Callahan expects to see a significant rally as investors realize that the doom and gloom has been overplayed. "A rally will come," said Callahan. "There won't be an event that triggers this, but concerns will fade."
-- Written by Ross Tucker in New York.
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