NEW YORK -- Wall Street is wilting in the summer heat, with investors increasingly uncertain about an economic and earnings recovery anytime soon.

More caution is likely in the coming week with a wave of earnings reports expected that may offers hints on corporate expectations for recovery from recession.

In the week to Friday, the Dow Jones Industrial Average declined 1.62 percent to 8,146.52 and the broad-market Standard & Poor's 500 index lost 1.93 percent to 879.13, marking four consecutive losing weeks for those indexes.

The technology-heavy Nasdaq dropped 2.25 percent over the week to 1,756.03.Al Goldman, chief market strategist at Wells Fargo Advisors, said the market remains in a "correction-consolidation" phase within a trading range.

"The correction is doing what corrections do -- increasing fear and frustration, decreasing glee and bullishness," he said.

The economic outlook "has most folks confused," said Goldman.

"We believe the data suggests that the end of the recession is near -- that's the good news for investors. However, the data also appears to indicate, as we have been saying for a month, that a strong economy is not just around the corner," he said.

"Similar views come from Stephen Auth, chief investment officer at Federated Investments," he said.

"Our view is that an economic recovery has in fact begun, and that a second or third dip, depending on how you count the waves we've had since the recession began ... is unlikely but not impossible," Auth said.

"This forecast suggests that the outlook for returns on financial assets will likely be muted, and specifically that stocks are unlikely to return to their old highs anytime soon. This said, off current low levels, we do believe that the best returns investors can hope for over the next 12 to 18 months are likely to come from stocks, even if the pattern of getting there may be erratic."

Auth said the S&P 500 is likely to drift toward the 1,000 level, some 15 percent above current levels, and that "the downside is 'protected' by the promise of continued government economic stimulus."

David Rosenberg, chief economist and strategist at Gluskin Sheff, warned that stock investors should not look for strong gains simply based on a forecast of an end to recession, arguing that a "sustainable expansion" is needed.

"If the lesson from the 2000-2002 cycle is any indication, calling for the recession to end is basically irrelevant," Rosenberg said.

"What matters is that the recession's end gives way to a vigorous expansion."

Rosenberg said a recovery needs to produce gains in four areas -- employment, production, sales and incomes -- and that this does not seem to be happening."

From our lens, there is still no sign that we have reached that point where all four economic indicators have bottomed," he said.

"Not even close, especially with respect to employment, production and income."Richard Kelly, economist at TD Securities, said the strong 40 percent rally from lows in March have been a result of too much exuberance.

"Markets might have gotten ahead of themselves this past spring," Kelly said.

"At the first sign of good news, equities rallied, but now with earnings season upon us, many analysts seem to be questioning whether the earnings expectations embedded in those higher prices can be met given the ongoing economic slack."

Gregory Drahuschak at Janney Montgomery Scott argued that much of the negative outlook has been priced into the market.

"We think the economy is in the early stages of exiting a recessionary mode and into a period of modest but positive growth," he said.

Drahuschak said investors need to be positioned for a 2010 recovery even if the signs are weak.

"What the market thinks the data will be early in 2010 will impact stocks," he said.
"At some point in the not too distant future we continue to believe that the market will be in the midst of a major rally. We do not want to miss that move."

Bonds strengthened. The yield on the 10-year Treasury note fell to 3.413 percent from 3.495 percent a week earlier and that on the 30-year bond eased to 4.201 percent from 4.317 percent.

Bond yields and prices move in opposite directions. In the coming week, the market will see economic data on retail sales, consumer and wholesale inflation, as well as earnings reports from key firms such as Google, Goldman Sachs, JPMorgan Chase and General Electric.