updated 9/7/2008 4:14:39 PM ET 2008-09-07T20:14:39

The stock market has lurched back near its July lows — but Wall Street’s concerns are a bit different now than they were then.

Major Market Indices

In July, investors were vexed about record-high oil prices; since that time, crude has fallen nearly 28 percent. Back then, financial services companies were dragging down the broader market; over the past two months, the financial sector has outperformed the major stock indexes.

And Wall Street has now finally gotten some closure on one of its biggest unknowns: the fate of Fannie Mae and Freddie Mac. The Treasury announced Sunday that it is taking over the two mortgage financiers.

Investors are hopeful that the government’s move will bring demand back to the tight credit markets.

But Wall Street’s been burned before, and will be keeping a close eye on how the credit markets perform and on economic data. This week, they’ll be watching for readings on retail sales, pending home sales, the trade deficit and wholesale inflation.

The Dow Jones industrial average finished last week 2.79 percent lower, even after rising modestly Friday despite a big jump in the unemployment rate. The Standard & Poor’s 500 index ended the week down 3.16 percent, while the Nasdaq composite index dropped 4.72 percent.

Wall Street has been hesitant to make any long-term bets on stocks not only because of the weak U.S. economy, but also because of the teetering global economy. On the surface, it’s a positive that oil has fallen and that the dollar has rebounded. But investors know the reason for the shift is that other countries are following the United States into an economic slowdown.

“You’re seeing a big shift in forecasts for global economic growth, and that’s definitely having its impact on the markets,” said Michael Materasso, senior vice president and co-chair of Franklin Templeton fixed-income policy committee.

If the United States beats other developing nations in rebounding from what many economists are calling a consumer recession, the U.S. stock market should benefit.

“The U.S. is first in; it’s probably first out. That’s what the dollar is reflecting,” said Richard E. Cripps, chief market strategist for Stifel Nicolaus. “But the light at the end of that tunnel isn’t here yet.”

Given the scanty signs of an economic rebound, there are few investors bold enough to make big bets on U.S. stocks — particularly with so many U.S. companies dependent on overseas revenue, and as questions linger about the health of the financial industry.

So it’s possible the Dow will stay volatile for a while, and perhaps fall back toward the two-year lows it reached earlier in the summer before recovering again.

“This market looks like it wants to test the lows it had in July,” Cripps said.

This week, the National Association of Realtors is expected to report a dip in pending home sales; the Commerce Department is anticipated to report a widening of the international trade gap; and the Labor Department is expected to show a decline in last week’s jobless claims.

On Friday, the Labor Department will release its reading on wholesale inflation, and investors will see whether their inflation worries have truly dissipated. The Producer Price Index is expected to have fallen by 0.5 percent in August after spiking by 1.2 percent in July, according to the median estimate of economists surveyed by Thomson/IFR.

The core index — which strips out food and energy prices — is expected to inch up by 0.2 percent.

Also Friday, the Commerce Department reports on August retail sales; after poor monthly sales from individual retailers last week, economists are predicting a modest rise of 0.3 percent.

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