NEW YORK, Jan 10: US stocks face an uphill battle next week with investors bracing for an onslaught of dismal corporate earnings and economic reports amid the deepening recession.

The earnings season is going to be difficult. I think that’s probably what the market is worried about more than anything else, said Marc Pado, analyst at Cantor Fitzgerald.

The three major indices shed four per cent on average in the week to Friday.

The first full trading week of 2009 ended with a Labor Department report of the worst annual job losses since World War II.

Friday’s bleak report showed the economy shed 2.6 million jobs in 2008, with the bulk of them, 1.9 million, in the last four months of the year.

It was the biggest annual job loss since 1945, the department said, capped by a massive 524,000 job cuts in December that sent the US unemployment rate to 7.2 per cent, a 16-year high.

The stock market ended a down week with losses in the major averages, after a closely watched economic report signaled the recession is deepening, said Al Goldman at Wachovia Securities.

The Dow Jones Industrial Average closed Friday down 4.8 per cent for the week, at 9,034.69, after gaining six per cent the prior week.

The tech-heavy Nasdaq shed 3.7 per cent to 1,571.59 over the week and the broad-market Standard & Poor’s 500 declined 4.4 per cent to 890.35.

The monthly jobs data is a key indicator of momentum in the world’s largest economy or, in this case, the lack of it. The economy slid into recession in December 2007.

The jobs report underscored the urgent challenges that president-elect Barack Obama faces when he takes office on January 20, pledging to tackle the recession as his first priority.

Investors were closely following the development of Obama’s stimulus plan which includes tax cuts and investment spending and is estimated to cost $775 billion.

The choices for the new president are simple. It’s either recovery or depression, said Peter Morici, a University of Maryland economist.

With retailers’ grim December sales reports last week still fresh in mind, investors’ expectations for company performances were set low.

Among Wall Street’s big players that already have sounded warnings:

Wal-Mart, the world’s biggest retailer; computer chip maker Intel; oil major Chevron; and media group Time Warner.

The breadth of the warnings is “showing that the earnings season is not going to be good,” Pado said.

Aluminum giant Alcoa kicks off the corporate quarterly earnings season Monday, followed notably by Intel on Thursday.

Most of the earnings reports arrive in the coming weeks, which could give the market a new test of its November lows, Pado said.

In addition to the expected announcements, Wall Street could be deluged in earnings warnings in the coming days, warned Gina Martin of Wachovia Capital Markets.

In light of the “depressing” economic data, she said, “investors are trying to take a relatively prudent wait-and-see attitude regarding the stock market. On the macroeconomic front, the week will be dominated by inflation reports, with import prices Wednesday, producer prices Thursday and the closely watched consumer price index (CPI) Friday.

Economic indicators next week will play out like the all-too-familiar scenes from the classic movie, ‘The Good, the Bad and the Ugly, said IHS Global Insight analysts Brian Bethune and Nigel Gault.

For the analysts, “the good” will be benign November trade data on Tuesday.

On the “bad” side will be Wednesday’s report on December retail sales, while the “ugly” will be industrial production figures on Friday.

The bond market closed the week mixed. The yield on the 10-year Treasury bond fell to 2.407 per cent Friday from 2.146 per cent a week earlier, while the yield on the 30-year Treasury rose to 3.055 per cent from 2.815 per cent.

Bond yields and prices move in opposite directions.—AFP