Unless stocks stage a major rally, investors will likely be relieved to put May in the rearview mirror.
NEW YORK (TheStreet) -- Yes, there's a big jobs report waiting next Friday, but investors will continue to be on pins and needles about news out of Europe in the coming week.
The major U.S. equity indices managed a positive overall finish last week, snapping a three-week losing streak, but that was really more a product of how poorly equities had already performed in May. For example, as of Friday's close, the Dow Jones Industrial Average has logged only four positive sessions this month.
If the blue-chip index can't muster an up day next week, you would have to go back to September 1903 to match that level of ugliness, according to data provided by Dow Jones Indexes.
There's a good chance that Friday's mild selloff would have been a lot worse if it weren't a low-volume lead-in to Memorial Day weekend.
The headlines from Europe took a turn late in the day, and for once, Greece wasn't the main problem.
Spain stepped up with Bankia -- already partially nationalized -- estimating it's going to need nearly $24 billion in additional bailout funds from the Spanish government.
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Standard & Poor's did its part as well, downgrading a number of the country's prominent banks because of recessionary concerns.
All this comes against the backdrop of the rising talk that Greece exiting the euro is a distinct possibility. Europe's leaders paid a lot of lip service this week to their commitment to keeping the country in single-currency bloc but crossing the line from rhetoric to action hasn't happened yet.
"I'm predicting that five years from now, the euro won't exist," said Kevin Mahn, the president of Hennion & Walsh Asset Management.
"Greece will be the first to exit and return to the drachma," he added. "The intentions behind the euro were good, to try to make a formidable trading bloc with the rest of the world, but it comes to pieces with a crisis in one of the member countries, and now they all have to agree on how to bail out that country."
The Dow Jones Industrial Average rose 85.37 points, or 0.69%, to finish the week at 12,454.83. The S&P 500 increased 22.09 points, or 1.7%, to close at 1,317.82 on Friday. The Nasdaq Composite gained 53.95 points, or 1.94%, to end the week at 2,837.53.
Year-to-date, the Dow is up 1.9%, the S&P 500 has gained 4.8%, and the Nasdaq has advanced nearly 9%. At a low of 12,289 during Wednesday's session, the Dow was within 75 points of going negative for 2012.
For his part, Mahn will be watching Germany's actions next week. Any idea on how to handle the deterioration of Greece's finances can't succeed without the support of German Chancellor Angela Merkel. That's why eurobonds -- which some other members of the European Monetary Union have advocated -- aren't likely to get any traction.
"If Germany no longer wants to participate in bailouts, Germany doesn't need the rest of Europe," Mahn said. "That's the biggest area of concern. I'll be watching German sentiment."
The euro visited close to two-year lows this week, but Street One market technician Dave Chojnacki thinks more downside lies ahead if it becomes more likely that Greece gets the boot or European banks start to see more people pulling out their assets.
Stateside, the big news is expected to be the May jobs report next Friday. The current consensus is for nonfarm private payrolls to swell by 172,000, according to Briefing.com, a nice bump up from April's total of 130,000.
"To move the market, the jobs number would have to swing wildly on the upside and mildly on downside," said Hennion & Walsh's Mahn. "I think in large part individual investors have been very skeptical of the 2012 rally. Any more signs of a slowdown in the U.S. economic recovery, more concerns on Europe, issues with jobs and real estate, all that will feed into pessimism."
The coming week's economic news also includes the Conference Board's read on consumer confidence for May on Tuesday. April's number came in at 69.2 and Briefing.com is forecasting an improvement to 71.
The earnings calendar is light, with Lions Gate Entertainment(:LGF), DryShips(:DRYS) and Vera Bradley(:VRA) among the companies expected to deliver their quarterly reports next week.
DryShips is slated to open its books on Tuesday. On average, analysts anticipate the Athens-based drybulk carrier company will report a first-quarter loss of 2 cents a share on revenue of $267.76 million.
Lions Gate, which has been making headlines recently for its Hunger Games movie, is due to report its fiscal fourth-quarter results on Wednesday. The consensus is calling for the entertainment company to post earnings of 26 cents a share on revenue of $618.81 million.
From a technical perspective, Chojnacki is paying attention to the 1280 level for the S&P 500. That's right around the index's 200-day moving average. He puts the top of the index's range at around 1340-1350 and expects stocks could be stuck somewhere in between for a while.
"I could see us in that range for months," Chojnacki said.
-- Written by Alexandra Zendrian in New York.
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