NEW YORK (CNNMoney.com) -- Investors returning from a long holiday weekend better come back well rested, as the weeks ahead bring something of a battle.
"The market is near a critical point where if it loses just a few more percentage points, it's really going to collapse," said Stephen Carl, head equity trader at Williams Capital Group.
The S&P 500 and Nasdaq composite are within shouting distance of a bear market - a drop of 20% off the highs. The Dow is slightly less bruised and battered - it's down just 13.5% from the April highs versus a drop of 16% for the S&P 500 and 17% for the Nasdaq.
Should any one of those major averages surpass that 20% level, it could easily trigger the others, sending the broad markets into an even bigger retreat. Standard & Poor's research shows that a drop of more than 15% results in a "correction" becoming a bear market the majority of the time.
Stocks have slumped for two months straight, with investors starting to bail out in early May after a rally that pushed the S&P 500 up 80% off the bottom hit in March 2009.
Worries about the European debt crisis and the sluggish U.S. housing and labor market got the ball rolling, and the trend has been downward ever since. On Friday, a weak June jobs report left the Dow and Nasdaq at 8-month lows and the S&P 500 at a nine-month low.
There's little on the calendar in the first part of the week that could push the market sharply one way or another. But Thursday and Friday bring readings on housing and retail sales that will speak to the health of the consumer.
"We could see consumers pull back more, but they have already cut so much that unless we are moving into another period of massive layoffs, you're not going to see consumption slow," said Jane Caron, chief economic strategist at Dwight Asset Management.
She said she doesn't think the economy is heading for a so-called double dip recession, but rather an extended period of very slow growth.
Earnings: On the upside, earnings forecasts remain robust, despite the global slowdown worries, with second-quarter profits expected to have grown 27% from a year ago. Full-year 2010 earnings are expected to have risen 34% from a year ago.
Some market experts believe estimates are too high and are likely to get cut if the forecasts that accompany the second-quarter results disappoint. But for the time being, there's an argument to be made that the price-to-earnings ratios make stocks appealing.
"As you lose 16% or 17% on the S&P, you've factored in a level of recession that many not materialize," said Stephen Goldman, market strategist at Weeden & Co. "This is an attractive level for the S&P if you don't think we're going into a double dip."
However, Goldman cautioned that while he doesn't think the market is likely to rally at this point, but that it may have gotten "oversold."
"Either you think we're heading into a double-dip recession and you get out, or you look at the underlying fundamentals and use this as a buying opportunity," said Tommy Williams, president at Williams Financial Advisors.
Monday: All financial markets are closed for the celebration of Independence Day.
Tuesday: The Institute for Supply Management's services sector index is due shortly after the start of trade. The index is expected to have increased to 55.5 in June from 55.4 in May.
Wednesday: The American Bankers Association releases its report on consumer credit delinquencies.
Thursday: The weekly jobless claims report from the Department of Labor is due in the morning and will be a market mover after the recent new leg down for the labor market.
The nation's chain stores will be reporting June sales for stores open a year or more, also known as same-store sales. Amid worries about the strength of the consumer, the reports will be a test of confidence in the economy.
The weekly crude oil inventories report from the government is due in the late morning.
The May consumer credit report from the government is due in the afternoon. Credit is expected to have fallen by $2 billion after rising by $1 billion in April.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.86%||3.77%|
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|15 yr refi||3.10%||3.01%|
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