Wall Street sinks on job losses data, heads into corporate earnings spell

       Having lost some of its swagger from a powerful six-month rally,Wall Street heads into corporate earnings season with renewed skittishness about prospects for an economic recovery.
       The latest economic data has cast fresh doubt on the notion of a strong recovery from recession, and investors will look to the upcoming quarterly reports for signs of whether Americans are emerging from a long retrenchment.
       In the week ending on Friday, the blue-chip Dow Jones Industrial Average slid 1.84% to 9,487.67, in a second straight weekly loss after the indices hit 11-month highs in September.
       The technology-rich Nasdaq composite sank 2.05% to 2,048.11 and the Standard & Poor's 500 broad-market index slid 1.84% to 1,025.21.
       The losses came on disappointing economic news, highlighted by a shock unemployment report on Friday that showed the labour market reversing course after several months of improvement.
       Official data showed job losses accelerated to 263,000 in September and the unemployment rate rose to 9.8%,pouring cold water on the notion of a quick and strong recovery from the nearly two-year-old recession.
       "The market practitioners who believe the recovery is based on sand are seeing a lot of evidence in this and other recent data," said Cary Leahey, senior economist at Decision Economics.
       The market now looks to corporate earnings, starting with Wednesday's report from aluminum giant Alcoa the first of the blue chips to report results - for clues on the direction of economic activity.
       "The looming question is whether investor expectations are now set at a reasonable level or too high considering the challenges that continue to face the US economy," said Fred Dickson, market strategist at DA Davidson & Co.
       "We feel comfortable forecasting a nice rebound in corporate earnings even in a weak growth economy as most companies have trimmed costs thereby significantly raising productivity of their workforce during the last 18 months."
       The market is still sitting on hefty gains after a solid 15% rise in the JulySeptember quarter for the Dow and S&P 500, and a six-month rally of around 50%.
       Analysts say the market needs to see evidence the economy is on the mend to add to those gains.
       "US equity markets may have racked up their finest third quarter in seven decades, but the low hanging fruit has almost certainly been picked, as the last few days can attest," said Sal Guatieri at BMO Capital Markets."Less-bad news no longer will sustain the rally, as the economy must now prove it can sustain a recovery. But the mish-mash of indicators released this week, showing the economy took two steps forward in the summer and a big step back in early fall,was less than inspiring."
       RBC Wealth Management analyst Bob Dickey said the rally still has legs since the worst of the economic crisis is over.
       "The market is already in a modestly oversold condition, and as such, could bottom and rally again at any time," he said.
       In the coming week, the market will also ponder a purchasing manager survey of the services sector by the Institute of Supply Management and data on the US trade balance.