Wall Street: Teetering on 12-year lows

As the Dow and S&P 500 hover near '97 levels, investors brace for a barrage of economic news and watch for the latest from Washington.

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By Alexandra Twin, CNNMoney.com senior writer

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NEW YORK (CNNMoney.com) -- Fasten your seat belts. The week ahead could be critical as the stock market sits on the precipice of nearly 12-year lows.

All the pressure points are in play, with reports or Congressional hearings due on housing, consumer spending, government spending, bank rescue efforts, manufacturing and perhaps most significantly - the labor market.

How Wall Street reacts to the news will be key. Investors continue to look for signs that the market has factored in enough of the bad news to at least stabilize, if not move higher.

"That we are at 12-year lows tells you that we are in a period of enormous uncertainty and that nobody knows where the bottom is," said Bernard McGinn, CEO at McGinn Investment Management.

"It shows that people are losing their belief in equities as a way to grow assets, and that they'd rather put their money elsewhere," he said.

Believe it or not, it is still not bleak enough to suggest a so-called bottom is forming -- at least not by contrarian standards.

The S&P 500 and Dow industrials are both now roughly 50% off their all-time highs from October 2007 and this has made some investors think that a big rally could be brewing, said Richard Sparks, senior equities analyst at Schaeffer's Investment Research.

However, the retreat could easily surpass 50% and the fact that some people are optimistic about a rally starting concerns him. "That's not what you see at a bottom," Sparks said. "You usually see panic or apathy and we're not seeing either right now."

Bad news bears: Traders and technicians were discouraged Friday when the S&P 500 fell below its trading low from Nov. 21 of last year, previously thought to be the bear market bottom. That put the S&P 500 at a nearly 12-year intraday low a few days after it made a nearly 12-year closing low. The Dow also hit 1997 trading levels and closed at a nearly 12-year low Friday. The Nasdaq, which has held up better than the broader market, remains above its Nov. 21 lows.

These technical levels will be relevant in the week ahead as investors sort through what is expected to be another barrage of rough economic news.

Standouts include January readings on personal income and spending and the February ISM manufacturing index, both due Monday. Tuesday's highlights are the January pending home sales report and Congressional hearings on Obama's budget proposal.

On Wednesday, employment moves front and center with reports from payroll processing firm ADP and outplacement firm Challenger, Gray & Christmas. In Washington, there's a hearing on oversight of the TARP, a.k.a. the bank bailout.

Thursday brings a slew of February sales from the nation's retailers as well as the weekly jobless claims report and a January report on factory orders. There's also a Congressional hearing on AIG. Friday is the February jobs report.

Economy

Monday: January personal income is expected to have declined by 0.3% after falling 0.2% in the previous month, according to a consensus of economists surveyed by Briefing.com. But spending is expected to have risen by 0.3% after falling 1% in December. The Core PCE deflator, the report's inflation component, is expected to have risen by 0.1% versus a flat reading in December.

Construction spending is expected to have fallen 1.5% in January after dropping 1.4% in the previous month.

The ISM manufacturing index is expected to have declined to 34 from 35.6 in January, remaining in recessionary territory.

Tuesday: The pending home sales index for January is expected to have fallen 3% after rising 6.3% in the previous month.

Wednesday: Payroll processing firm ADP releases its monthly employment report before the start of trading. Private-sector employers are expected to have cut 613,000 jobs in February after cutting 522,000 in the previous month.

Separately, outplacement firm Challenger, Gray & Christmas releases its February report on planned job cuts.

The ISM services sector index, due after the start of trade, is expected to have fallen to 41.3 from 42.9 in February.

Wednesday also brings the government's weekly oil inventories report and the Fed's periodic "beige book" reading on economic activity.

Thursday: Factory orders in January are expected to have fallen 2.1% after having fallen 3.9% in the previous month.

Thursday also brings the weekly jobless claims report, a slew of February sales reports from the nation's retailers and a revised reading on fourth-quarter productivity.

Friday: The government's February employment report is due before the market open. Employers are expected to have cut 615,000 jobs from their payrolls after cutting 598,000 in January. The unemployment rate, generated by a separate survey, is expected to have risen 7.9% from 7.6% in the previous month.

Washington

Tuesday: Federal Reserve Chairman Ben Bernanke testifies before the Senate Budget Committee on economic and budget challenges, starting at 10 a.m. ET.

Peter Orszag, director of the White House Office of Management and Budget, testifies before the House Budget Committee about the fiscal 2010 budget, starting at 10 a.m. ET. He also testifies Wednesday, before the House Ways and Means Committee starting at 2:00 p.m. ET.

Last week, Obama outlined his outlook for the federal budget over the next ten years, including a roughly $3.6 trillion budget for 2010.

Wednesday: A House Financial Services subcommittee holds a hearing on oversight of the Troubled Asset Relief Program (TARP), staring at 2:30 p.m. ET.

Thursday: There's a Senate Banking Committee hearing on AIG, with Federal Reserve Vice Chairman Donald Kohn scheduled to testify. The hearing begins at 10 a.m. ET.

Also Thursday, the Obama administration is expected to provide more details on the already announced $75 billion housing rescue plan. To top of page

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