Wall Street Looks Ahead to 2008

It appears that Wall Street is nervous about the upcoming year.

As 2007 comes to a close, Wall Street is almost as jittery as it was over the summer, when worries about the housing slump and banks' losing bets on mortgages first came to a head.

Investors know more now about how much exposure financial institutions have to bad loans — quite a lot — but they remain uncertain about how the credit crisis of 2007 will hurt the economy in 2008. Market participants will be paying close attention to this week's economic data, particularly the monthly report on employment, seen as the most important factor in preventing housing woes from crippling consumers.

Last week, the Dow Jones industrial average ended 0.63 percent lower, the Standard & Poor's 500 index finished down 0.40 percent, and the Nasdaq composite index fell 0.65 percent.

The three major indexes will finish the year with gains, barring any extraordinary drops Monday, but problems with credit, housing and the financial sector are likely to keep Wall Street nervous at least early on in 2008.

It's been a dismal fourth quarter for the stock market, and the "Santa Claus rally" Wall Street often launches at the end of every year failed to gain steam. The Dow has fallen 3.8 percent since the end of September, when many investors were driving the blue-chip index toward record heights and betting that the worst of the credit crunch was over.