NEW YORK (Reuters) - Wall Street may struggle this week to build on its best weekly performance in almost 30 years as investors grapple with a raft of economic data, including the November jobs report, that will likely provide more evidence of a deep economic downturn.
This week, investors will keenly watch retail sales to see if consumers opened their wallets and began buying gifts on Black Friday, as the day after Thanksgiving is known. It's the traditional start of the holiday shopping season and usually one of the year's biggest shopping days.
But this time, holiday sales forecasts are grim as the end of easy credit and rising unemployment have made consumers more frugal.
Wall Street ended last week's holiday-shortened run in the black, snapping a weeks-long losing streak as investors were encouraged by the U.S. government's bailout of Citigroup (C.N: Quote, Profile, Research, Stock Buzz).
The Standard & Poor's 500 Index had its best week since at least 1980 -- jumping 12 percent. That's a turnaround from the previous week, when the S&P had its lowest close since 1997. For the four-day week, the Dow Jones industrial average rose 9.7 percent and the Nasdaq Composite Index .IXIC surged 10.9 percent. The U.S. stock market was closed on Thursday for Thanksgiving.
Still, steep losses among financial and automaker stocks made this among the worst months for Wall Street since the October 1987 stock market crash. For November, the Dow fell 5.3 percent, the S&P 500 dropped 7.5 percent and the Nasdaq lost 10.8 percent.
Year to date, the Dow is down 33.4 percent, while the S&P 500 is off 39 percent and the Nasdaq is down 42.1 percent.
In the coming week, Friday's data on November non-farm payrolls will be the most crucial indicator.
"The most important thing for the economy going forward will be jobs," said Gail Dudack, chief investment strategist of Dudack Research Group in New York.
U.S. payrolls probably shed 316,000 jobs in November, following October's drop of 240,000 jobs, according to economists polled by Reuters. The unemployment rate is seen rising to 6.8 percent in November from October's 6.5 percent.
The monthly job figures are likely to underscore worries about the U.S. economy's health that have already helped drive stocks down to multiyear lows.
TAKING SANTA'S PULSE
Even Santa Claus can get the blues, if he's worried about being laid off.
Data showing store traffic and sales for the Black Friday weekend will be released by Sunday, which could set the tone for the beginning of the week. Some shoppers told Reuters they were buying less this year than in Christmases past.
"It'll certainly determine the course of the market for the next week or two," said Warren Simpson, managing director of Stephens Capital Management in Little Rock, Arkansas, concerning the Black Friday turnout.
On Thursday, the International Council of Shopping Centers will release November same-store sales for U.S. retail chains, which may offer more clues about how much consumers are cutting back amid rising unemployment and a sinking economy.
Retail sales figures get close scrutiny because the consumer is a major pillar of the U.S. economy. The ability of Americans to keep spending in the face of a deepening downturn is considered essential to reigniting growth.
Earnings this week include three retailers: office supplies chain Staples Inc (SPLS.O: Quote, Profile, Research, Stock Buzz), youth-oriented clothing store Aeropostale Inc (ARO.N: Quote, Profile, Research, Stock Buzz), and Williams-Sonoma Inc (WSM.N: Quote, Profile, Research, Stock Buzz), known for gourmet kitchen tools and upscale items for the bedroom and bath.
DREAMING OF A YEAR-END RALLY
The week's economic reports include the Institute for Supply Management's November reading on U.S. manufacturing on Monday, monthly domestic car and truck sales on Tuesday, the ISM's November index of non-manufacturing, or service-sector, activity on Wednesday, and weekly jobless claims on Thursday.
The Federal Reserve's beige book, an anecdotal survey of regional economic conditions, will be released on Wednesday.
Bucky Hellwig, senior vice president of Morgan Asset Management in Birmingham, Alabama, said the reaction to the jobs report and other economic data could test some investors' theories that a market bottom was reached in late November.
"If we see a bigger-than-expected contraction and a jump in unemployment, that would create some rethinking on the fact we've hit bottom," Hellwig said.
Stocks rallied last week on the Citigroup rescue.
Late last Sunday, Washington agreed to inject $20 billion into Citigroup, the second-largest U.S. bank, and to shoulder most losses on about $306 billion of its risky assets.
The Federal Reserve also threw a lifeline to U.S. consumers on Tuesday with two new programs aimed at making it easier to obtain loans for homes and cars, as well as credit cards.
Financial companies' stocks advanced all last week. Investors will look to see if the rally can be sustained.
Market observers are also expected to assess the impact of a rash of militant attacks in Mumbai, the economic hub of India, during which at least 124 people were killed, including at least three Americans. For details, see ID: nLR648031
If the stock market manages to hold onto last week's gains when volume returns after the Thanksgiving holiday, it could spur a year-end rally, said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Group in Chicago.
"We are seeing what could be the makings of a Santa Claus rally," Kinahan said.
But he added that the market's trend won't be clear "until next week when all players are back at work." Then it may become apparent whether there will be a reinforcement of the past week's gains "or we go back to our new lows."
(Additional reporting by Doris Frankel and Jennifer Ablan; Editing by Jan Paschal)
(Wall St Week Ahead runs every Sunday. Comments or questions on this one can be e-mailed to leah.schnurr@thomsonreuters.com)
