With Wall Street in the middle of an earnings free fall, investors will eye any moves from the White House next week to revive banks and craft a recovery plan to salvage the economy from its year-long recession.
Investors also will tune in to the Federal Open Market Committee's statement from the meeting on Tuesday and Wednesday for any clues on how the Federal Reserve will address these problems.
Next week, 137 companies in the S&P 500 and 12 Dow components will report earnings, in what's expected to be the weakest in this six-quarter streak of negative growth.
Banks in particular will be in focus as news that President Barack Obama and his economic advisers will meet on Saturday fueled hopes that the new administration will put together another rescue package for the ailing banking sector.
The progress of the $825 billion economic recovery package being crafted in Washington will also be closely observed. On Friday, President Obama urged lawmakers to act swiftly, saying the United States was experiencing "an unprecedented economic crisis."
"For investors, a lot is riding on the upcoming stimulus plans," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.
Data on home sales, jobless claims and a reading on the fourth-quarter U.S. gross domestic product next week will likely confirm Obama's viewpoint.
Still, the path is likely to be anything but smooth for the economic recovery program, cautioned Craig Peckham, equity trading strategist for Jefferies & Co in New York.
"It's a long road from here to there," he said "It is far from being a unanimously supported platform."
MORE EARNINGS GLOOM
Earnings from McDonald's Corp (MCD.N) and Verizon (VZ.N) will offer a reading on consumer spending, while results from Caterpillar (CAT.N) and DuPont (DD.N) will provide some clues on the strength of investment spending. Oil giants Chevron (CVX.N) and Exxon Mobil (XOM.N) will also report results.
But corporate profits are expected to drop 28.1 percent during this earnings season, ThomsonReuters data shows, with seven of the S&P 10 sectors expected to see double-digit declines.
This is in line with bleak economic data expected on existing home sales, new home sales and weekly jobless claims.
An advance reading of the U.S. fourth-quarter GDP is expected to show contraction at an annual rate of 5.4 percent -- far worse than the previous quarter's 0.5 percent decline.
"This is a very bad number and probably the worst number in 26 years," said John Praveen, chief investment strategist at Prudential International Investments Advisors in Newark, New Jersey.
