NEW YORK (TheStreet) -- Investors are probably glad this week is over. Led by the free-fall in oil prices, the market had its worst week since May 2012.
The S&P 500 is down 3% from its most recent high just a week ago. The Dow Jones Industrial Average, which flirted with 18,000 a week ago, is down nearly 4%.
But there's no rest for the weary. Wall Street is already gearing up for next week's Federal Reserve meeting. The central bank is expected to remove its longstanding pledge to keep interest rates at near zero for a "considerable time," signaling that rates will start rising in June.
At least the Fed will be diverting attention from the collapse in oil prices. In fact, some analysts think the slide in oil prices might actually prompt the Fed to hold off on raising rates, since it keeps inflation even more subdued.
"We would expect that, if anything, they lengthen their forecast" on when rates will rise, said LK Balanced Fund's Tom Sudyka in a call. "With what's going on in energy we're not seeing any inflationary pressures and so whatever the Fed says is likely to be positive."
But with the economy improving at a faster-than-expected clip, most pros think the Fed will signal higher rates.
"The stellar November employment report -- complete with a 0.4% rise in average hourly earnings -- bolsters the arguments of those Fed officials who want "considerable time" removed from the FOMC's forward guidance," Credit Suisse analysts wrote in a report. "We expect "considerable time" to be deleted as soon as the December 16-17 FOMC meeting but replaced with language that preserves flexibility on the timing of the first rate hike."
The Fed is expected to raise interest rates as soon as the second quarter next year after years at an artificially-low level. While the impending increase has caused market jitters, Oppenheimer chief market strategist John Stoltzfus notes that rate hikes haven't historically triggered bear markets for stocks.
"The last time the Federal Reserve began a series of rate hikes was at the end of June 2004," said Stoltzfus in his monthly chart book. "From the end of June 2004 through the end of June 2006, the Fed raised its benchmark rate 17 times in increments of 25 bps until it reached 5.25%. At the same time, stocks advanced with the S&P 500... rising 11.3%."
The Fed December meeting isn't the only item of note in a busy week for economic data. On Monday morning, November industrial production data will be released. Credit Suisse forecasts the measure to rise 1.1%, boosted by strong auto output and increased usage of utilities after unseasonably cold weather in the Midwest.
November housing starts are slated for release Tuesday morning, which are expected to strengthen 3.1% to 1.04 million after a rise in October building permits.
The November Consumer Price Index, due Wednesday morning, is expected to decline 0.1% month on month, a result of plummeting gasoline prices. Excluding volatile items such as food and energy prices, core CPI is expected to climb 0.1%, or 1.7% year over year.
Key earnings reports out next week include Darden Restaurants (DRI) on Tuesday, FedEx (FDX) and General Mills (GIS) on Wednesday morning, Oracle (ORCL) Wednesday evening, ConAgra Foods (CAG) and Rite Aid (RAD) on Thursday before the bell, Nike and Red Hat (RHT) after the bell and BlackBerry (BBRY) before market open Friday.
Without any market-moving economic measures such as these this week, stocks have been stuck in a rout with plunging oil prices triggering fear-induced selloffs. The S&P 500 closed Friday 1.6% lower, the Dow lost 1.7% and the Nasdaq slid 1.1%.
"Stocks really don't seem to know where they want to go right now," Raymond James' analyst Andrew Adams said in a research note. "The combination of slinking off overbought readings and tax-loss selling has put pressure on equities, while positive seasonality and economic releases have limited any losses. This juxtaposition has caused sort of an identity crisis for [the market]."
Crude was under pressure again after the International Energy Agency on Friday cut its forecast for oil demand in 2015 by 230,000 barrels a day to 900,000 barrels. It's the fifth time in six months the IEA has slashed its forecast.
"Short-term, it's all trading-driven and so it could continue to drift downward. It's mostly geopolitical pressure," added Sudyka.
West Texas Intermediate crude on Friday was down 3.9% to $57.63 a barrel, its lowest point since May 2009. Prices are now down 44% from a mid-summer peak. Oil stocks continued to crater with Exxon Mobil (XOM) down 2.7%, Chevron (CVX) falling 2.4% and BP (BP) 2.9% lower. The Energy Select Sector SPDR ETF (XLE) dropped 1.8%.
--Written by Keris Alison Lahiff in New York.