Stocks face dour jobs and retail data

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By Leah Schnurr and Deepa Seetharaman

NEW YORK (Reuters) - Wall Street may struggle to build on its best week in almost 30 years next week, 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.

Investors will also watch reports on the weekend's 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 biggest shopping days of the year.

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 the holiday-shortened week in the black, snapping a weeks-long losing streak as investors were encouraged by the government's bailout of Citigroup .

The Standard & Poor's 500 Index <.SPX> scored its best week since at least 1980 -- jumping 12 percent. That marked a turnaround from the previous week, when the S&P booked its lowest close since 1997. For the four-day week, the Dow Jones industrial average <.DJI> rose 9.7 percent and the Nasdaq Composite Index <.IXIC> surged 10.9 percent. The U.S. stock market was closed on Thursday for the Thanksgiving holiday.

Still, steep losses among financial and automaker stocks have 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.

In the coming week, the most crucial indicator will be the November non-farm payrolls report on Friday.

"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.

Economists polled by Reuters forecast the loss of 316,000 jobs in November, following October's sharp drop of 240,000 jobs. The U.S. unemployment rate is expected to jump 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 key to reigniting growth.

Earnings next week include three retailers: office supplies chain Staples Inc , youth-oriented clothing store Aeropostale Inc , and Williams-Sonoma Inc , known for gourmet kitchen tools and upscale items for the bedroom and bath.

TESTING FOR THE MARKET'S BOTTOM

Next 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 last week after stocks rallied on the Citigroup rescue.

"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.

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 week and 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.

If markets manage to hold onto this 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. That will be the time (to see) whether we had a reinforcement of what started this week 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 Friday. Comments or questions on this one can be e-mailed to leah.schnurr@thomsonreuters.com)

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