NEW YORK (CNN/Money) - After a spate of troubling news about the economy, Wall Street will spend much of the new week trying to digest it all, looking for reasons to buy stocks again.

Driven by economic news, ever-higher oil prices, more violence in Iraq and an unpredictable presidential race, to name a few, stocks sank last week.

The Dow Jones industrial average lost about 1.3 percent, the Nasdaq fell 1.1 percent and the S&P 500 lost 0.8 percent. [For a run-down of this week's key events, click here.]

If stocks are to snap back, spirits are going to have to improve significantly. After weeks of happy talk from economists, Friday's weaker-than-expected September jobs report -- which could have been worse, really -- was nevertheless a big disappointment and fueled a pessimistic tone on Wall Street.

Other economic news last week had set the stage:

• the price of oil crossed $50 a barrel and kept on climbing, as did home heating oil, while U.S. inventories of both were lower than expected
• September chain-store sales were so-so at best, and a survey by the NPD Group said holiday sales could disappoint
• and the ABC/Money measure of consumer confidence hit a three-week low, echoing the results of other recent surveys

Several Federal Reserve officials, meanwhile, made subtle hints that the Fed was getting ready to pause in its campaign to raise interest rates, a message echoed by Dallas Fed President Robert McTeer in an appearance on CNNfn's CNNmoney Morning program Friday.

"We may be coming to the point where future [policy] moves will become data-dependent," McTeer said. "We may still move in [a tightening] direction, but it won't be quite as automatic."

Citing a need for short-term rates to rise to a more "neutral" level, most of the banks that directly do business with the Fed still expect a rate hike at the Fed's next meeting in November, according to a Reuters poll Friday. But most also expect the Fed to take a break in December.

In a way, of course, this could be good news for stocks, since higher rates tend to slow economic growth, and earnings, which hurts stock prices. But if the Fed is keeping rates low because it sees economic storm clouds ahead, that's not such a great thing.

"Sure, lower rates might offer another brief respite in an environment that has seen increasing dollops of profit-warnings and negative economic news recently, but when that is all said and done, a poor operating environment is unlikely to be a boon for corporate profits -- or U.S. shares prices -- in the months ahead," said Michael Panzner, head of sales trading at Rabo Securities USA and author of a book called "The New Laws of the Stock Market Jungle."

Make no mistake -- corporate earnings are still pretty good.

Easing the sting of the economic news last week was a decent profit report from General Electric (Research), and most analysts expect earnings for the S&P 500 to grow nearly 15 percent in the third quarter. [For more on this week's key earnings reports, click here.]

But Alcoa (Research) missed its quarterly earnings estimates, and profit growth is widely expected to slow in the fourth quarter and into 2005.

Meanwhile, CEOs have become fairly pessimistic about the economy, according to a survey by The Business Council, which found that 70 percent of chieftains at America's biggest companies expect economic growth to be between 0 and 2 percent next year, weighed down by lingering fears about terrorism.

That could be evidence of why, despite a long stretch of robust profits, companies are still reluctant to invest much in new production capacity -- or hire.

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"They're saying they don't know if this is the time to take a risk," said Ram Kolluri, chief investment officer and president of Global Value Investors. "They have close to a trillion dollars in post-tax cash, and it's not doing any good for anybody."

In this environment, Kolluri said, investors will have a tough time making money by simply betting on the broader indices. A better idea, he said, would be to focus on dividend-paying stocks and companies with decent growth prospects that seem to be undervalued by the market.

"It's going to be somewhat sideways trading in the market here for a while," Kolluri said.

Key events in the week ahead:

• On Monday, the bond market will be closed for the Columbus Day holiday.
• Wednesday morning, the Department of Energy will release its weekly report on inventories of crude oil, gasoline and home heating oil. With energy prices rising steadily, the numbers have become a focal point for investors.
• Wednesday night, President Bush and Democratic challenger Sen. John Kerry debate for the third and final time in Tempe, Ariz. The debate will focus on domestic policies, including the economy.
• Thursday morning, Fed Governor Ben Bernanke is to speak at a monetary conference in Washington and the Labor Department will report on new claims for unemployment benefits.
• Also Thursday, the government reports on the U.S. trade gap for August. Economists forecast a rise to $51.3 billion from $50.1 billion in July, according to Briefing.com.
• Retail sales for September start a busy Friday morning. Sales probably rose 0.6 percent after falling 0.3 percent in August, according to forecasts.
• Also due: the producer price index for September. Economists expect PPI rose 0.1 percent after falling 0.1 percent in August. Excluding food and energy prices, forecasts for "core" PPI are up 0.2 percent after a 0.1 percent August dip.
• A little later Friday morning, the Fed will report on industrial production and capacity use in September. Economists expect output was up 0.4 percent, compared with 0.1 percent in August, and they expect capacity use at 77.5 percent versus 77.3 percent in September.
• Thirty minutes later, the University of Michigan will release its preliminary reading of consumer sentiment in October. Economists expect the index to rise to 95 from 94.2.