The Coming Week: Economy Holds Spotlight

Trading is expected to remain choppy next week, as investors look for greater clarity on the economic recovery and fourth-quarter corporate earnings, experts say.

Among the week's key economic events will be a meeting of the Federal Reserve's monetary policymaking body on Tuesday and the release of retail sales numbers for November on Thursday.

The market snapped its winning streak last Friday, with the Dow Jones Industrial Average ending lower for the first time in nine weeks. It fell 250 points, or 2.8%, to 8646. Elsewhere, the Nasdaq lost 56 points, or 3.8%, to 1422. The S&P 500 shed 24 points, or 2.6%, to 912.

Since October, the Dow is up 19%, the Nasdaq is higher by 28% and the S&P is ahead 14%. For the year, the Dow is still down 15%, the Nasdaq is off 28% and the S&P 500 is behind 13%.

"We have come a long way. But there is nothing to justify an up move from here," said Michael Driscoll, a trader at Bear Stearns, adding that people are tired and may have had it for the year.

On Tuesday, the Federal Open Market Committee will announce a decision on interest rates. Economists are widely predicting no change in monetary policy. At its last meeting in November, the central bank reduced interest rates to 1.25%, their lowest level in more than 41 years.

"I suspect the Federal Reserve will say they understand the recovery is not vigorous, but that hopefully activity will pick up soon," said Michael Moran, an economist at Daiwa Securities.

On Thursday, the Commerce Department will report November retail sales numbers. Despite strong returns from the Thanksgiving weekend, the monthly numbers are expected to be weak.

The consensus, according to Briefing.com, is forecasting retail sales to increase 0.3% in November after a flat reading in October, when vehicle sales were depressed. But excluding autos, they are predicted to be up only 0.2% in November, following a 0.7% gain in October.

Thursday's report will trail poor November sales results last week from several retailers, including Wal-Mart ( WMT), American Eagle Outfitters ( AEOS), Sears ( S) and Talbots ( TLB).

"I think uncertainty is still the watchword for the economy," said Peter Kretzmer, an economist at Banc of America Securities, who noted investors will be reflecting on the resignations of Paul O'Neill as Treasury secretary and Larry Lindsey, as White House economic adviser, in the coming week.

Meanwhile, investors will be looking for guidance from the corporate sector for the fourth quarter. "We continue to believe the market will come under pressure in the coming weeks due to a stronger-than-expected preannouncement season and increased analyst uncertainty regarding corporate profits," said Joseph Kalinowski, chief information officer at Ehrenkrantz King Nussbaum, in a research note.

Companies reporting earnings next week include Albertson's ( ABS), Hovnanian Enterprises ( HOV), Adobe Systems ( ADBE), AutoZone ( AZO), Ciena ( CIEN) and Mirant ( MIR).

More from Markets

Trump Takes Aim at Auto Imports; Markets End Mixed -- ICYMI

Trump Takes Aim at Auto Imports; Markets End Mixed -- ICYMI

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

Flashback Friday: The Market Movers

Flashback Friday: The Market Movers

OPEC Deal Doesn't Boost Production Enough to Drive Down Crude, Gasoline Prices

OPEC Deal Doesn't Boost Production Enough to Drive Down Crude, Gasoline Prices