The January jobs report due Friday will also be a highlight with economists expecting payrolls to fall.

Earnings season will continue to churn. Google is expected to post an 88% surge in fourth-quarter profit when it reports on Wednesday as it holds a dominant position in the online search engine and advertising markets.

Exxon Mobil is expected by analysts polled by Thomson Financial to report a 9% fall in fourth-quarter profit to $1.51 per share on revenue of $100 billion. A decline in earnings would reflect the pressure of lower commodity prices and a rise in exploration costs for the oil industry.

Results from P&G, the world's largest consumer-products company, are due Tuesday. Analysts are looking for earnings of 83 cents a share on sales of $19.57 billion, up from last year's earnings of 72 cents a share on sales of $18.34 billion. Its sales will likely benefit from weakness in the U.S. dollar.

Meanwhile, economists polled by MarketWatch are expecting the Labor Department to report a fall in nonfarm payrolls to 150,000 from 167,000 in December. The jobless rate is expected to remain at 4.5%.

Paul Nolte, director of investments at Hinsdale Associates, expects an even further decline in the payroll numbers, to a range of 100,000 to 130,000, due to weaker hiring in the housing sector which had been a "huge employer" over the last couple of years.

Ahead of the jobs report, the Fed will begin its two-day rate policy meeting on Tuesday. Most Fed watchers are expecting Federal Reserve Chairman Ben Bernanke and his policymakers to hold rates steady at 5.25%.

"The Fed is going to stay on the sidelines. There's very little reason for them to raise rates and there's very little reason for them to cut rates at this point, given the economic data that's been out," said Nolte.

The central bank has less incentive to cut rates because "there's growing evidence that the economy is strengthening early in 2007 and housing is becoming less of a drag," said Michael Malone, trading analyst at Cowen & Co.

Peters expects the Fed to stand pat next week and for its statement to reiterate its view that inflation is a bigger threat than an economic slowdown. It's more likely that the central bank will hike rates than cut them in the second half of the year if the economic growth spurt continues, he said.

After stronger-than-expected jumps in durable goods orders and new homes sales Friday, the fed funds futures market priced in a slight chance for a rate hike by the end of the first quarter.

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