Stocks: Brace for a volatile week

Reports on housing, labor, personal income and spending, and GDP are due in a shortened holiday week, which could see choppy trading.

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By Ben Rooney, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- Investors return Monday for the last few trading days of what has been a tumultuous year and face a slew of economic reports in a holiday-shortened trading week.

The days before Christmas bring reports on housing, the GDP, personal income and spending, and the latest reading on initial unemployment claims.

Trading could also be volatile with many investors out for the Christmas holiday. U.S. markets will close early Wednesday and will remain closed on Thursday.

Swings in the market are often amplified when fewer market participants are present. So even a modest amount of buying could turn into a more substantial rally.

"We could rally next week just because no one's here," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York.

And the market could find some short-term support "from a relief standpoint," said Abigail Doolittle, a portfolio manager at Johnson Illington Advisors, which has nearly $700 million in assets under management.

Doolittle said the government's support of the auto industry and optimism about President-elect Barack Obama's economic stimulus plans may buoy the market.

But given the outlook for first-quarter corporate results, a long-term rebound is unlikely, said Rovelli.

Indeed, fourth-quarter earnings per share for the companies in the S&P 500 are forecast to decline more than 10%, according to estimates from Thomson Financial.

Stocks capped a rocky week on a mixed note Friday as investors digested the Bush Administration's $13.4 billion auto bailout. The major indexes seesawed all week amid another interest rate cut by the Federal Reserve and dismal financial reports from Morgan Stanley (MS, Fortune 500) and Goldman Sachs (GS, Fortune 500).

Monday: The housing market will be in focus as the Hope Now Alliance, a coalition of lenders trying to help homeowners facing foreclosure, reports on its 2008 efforts and looks ahead to next year.

Tuesday: The government will release its final revision for third-quarter gross domestic product. Economists think the economy shrank at an annual rate of 0.5% in the quarter, unchanged from last month.

Also on Tuesday, the National Association of Realtors is set to announce figures for existing and new home sales in November.

Both reports are expected to show further declines. Existing home sales are forecast to decline to 4.93 million from 4.98 million in October. New home sales are seen falling to 420,000 from 433,000, according to estimates gathered by Briefing.com.

Meanwhile, the University of Michigan is expected to revise its consumer sentiment index lower to a reading of 58.6 from the 59.1 reading it announced on Dec. 12.

And the government's latest weekly crude inventory report will be released at 10:35 a.m. Oil prices have been hovering around 4-1/2 year lows despite a pledge by OPEC to cut production, starting in January.

Wednesday: Despite an early close at 1 p.m. ET for the Christmas holiday, the market will have a healthy dose of economic news to digest.

At 8:30 a.m. ET, the Commerce Department will issue its monthly report on November personal income and spending.

Personal spending is expected to be flat after a modest 0.3% increase in October, while spending is forecast to fall 0.8% after a decline of 1% the month before.

Also, the Labor Department will report its weekly jobless claims. Last week, the number of first-time unemployment filers, which had been at a 26-year high, fell more than expected.

Thursday: U.S. markets are closed for the Christmas holiday.

Friday: U.S. markets reopen for a full trading day. With the exception of Japan, all other world markets are shut in observance of Boxing Day. To top of page

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