WASHINGTON (MarketWatch) -- After several months of improvement in housing, manufacturing and sales, the U.S. economic recovery appeared to sputter in October, leading investors and analysts to re-evaluate whether their forecasts were too rosy.

The economic data to be released in the holiday-shortened week ahead could provide a few more "what-were-we-thinking?" moments. All in all, though, the data shouldn't kill hopes for modest growth while we wait for the private sector to start hiring again.

Last week, a "reality check" rippled through the markets following weak data on housing starts and industrial production, said Nigel Gault and Brian Bethune, U.S. economists for IHS Global Insight. They expect further "mixed and somewhat ambiguous" reports in the coming week, but, on whole, they say "the evidence is still positive and continues to point to a nascent recovery" that will need "strong policy support" for some time.

MarketWatch consensus See economic calendar date report forecast previous Nov. 23 Existing-home sales 5.74 million 5.57 million Nov. 24 GDP revision 2.8%  3.5% Nov. 24 Consumer confidence 45.5 47.7 Nov. 25 Jobless claims 495,000 505,000 Nov. 25 Durable goods orders 0.5% 1.4% Nov. 25 Durables ex-transportation 0.4% 1.2% Nov. 25 Personal income 0.1% 0.0% Nov. 25 Consumer spending 0.6% -0.5% Nov. 25 New home sales 390,000 402,000 Nov. 25 Consumer sentiment 67.0 66.0 Housing

Even four years after the peak, the state of the housing market remains central to the medium-term outlook.

Construction, sales and prices picked up over recent months after hitting generational lows, boosted in part by federal policies and in part by improvement in some of the fundamentals. But the weakening in the October data ahead of the anticipated expiration of the federal home-buying subsidy has put the strength of those fundamentals to the test.

The home-buyer tax credit, of course, has now been extended and even expanded. But buyers and builders didn't know that in October.

Last week, we found out that builders cut back on permits and starts on single-family homes in October, in anticipation that the tax credit would expire on Nov. 30.

This week, we'll get October data on sales of new and existing homes.

Economists surveyed by MarketWatch expect sales of existing homes to rise about 3% to a seasonally adjusted annual rate of 5.74 million. It would be the highest sales rate since June 2007. And it would reflect some sales of buyers rushing to get in ahead of the Nov. 30 deadline. Existing-home sales are recorded at closing.

By contrast, sales of new homes are recorded when the contract is signed, which is at least a month and often much more before the sale closes. To close on a sale before Nov. 30, a buyer would have had to sign contract in September or early October at the latest.

In part because the deadline would have passed for most buyers in October, sales of new homes are projected to have declined about 3% to a seasonally adjusted annual rate of 390,000, the survey says easy payday loans. Sales of new homes have underperformed compared with existing homes, probably because buyers can get a better deal on a foreclosed home or on a home owned by someone who needs to sell, fast.

Federal policies are clearly supporting the market, but there is uncertainty about how strong it would be without the support. Economists for Barclays Capital say that sales of existing homes would have risen 10% without the tax credit, instead of the 24% that has been recorded with it.

Although home prices have fallen and mortgage rates are very low, the housing market faces considerable problems. Foreclosures continue to rise and vacancy rates are at record levels, which mean prices could fall another 5% to 10% by the middle of 2010, according to Jan Hatzius, chief economist for Goldman Sachs.

If prices, sales and construction do sag, banks are likely keep credit extremely tight, which in turn could weigh on the pace of recovery, Hatzius said.

GDP revisions

The other big story for the week could be the revision to third-quarter growth figures. Last month, the Commerce Department said real gross domestic product grew at a 3.5% annualized rate, the first gain in a year. On Tuesday, that figure is likely to be revised to about 2.8%.

The revision comes from more complete data. In the first go-around, the government statisticians must estimate many of the key inputs for September, including foreign trade, inventories and construction spending. Now that those data have been released, it's clear the first estimates were too big.

The largest source of revisions will come from nonresidential construction spending and net exports. Spending on nonresidential structures was weaker than first thought, while imports were stronger than believed, suggesting that more of the gains from increased sales in the third quarter accrued to foreign producers, rather than domestic companies. Inventories will be revised lower.

"Despite the likely downward revision, we still believe that the third quarter will prove to be the first quarter of recovery and that it demonstrates a decisive turn in the economy," wrote economists for Barclays Capital.

Economists see the economy growing at a pace just above its long-term trend. They expect GDP to grow 2.5% in the fourth quarter, 3% in the first quarter of 2010 and 3.5% in the second quarter. That's a far cry from the 6% growth seen in typical V-shaped recoveries, but it's better than a poke in the eye with a sharp stick.

Of course, those are just forecasts. No one really knows for sure how the economy will do over the next 12 to 18 months.

Economic Preview: Do weaker data show recovery is stalling?

BARCELONA/SAN FRANCISCO (Reuters) – Chip stocks fell on Thursday after Bank of America Merrill Lynch downgraded the sector on a possible inventory correction, although two of Europe&&9;s top chipmakers were upbeat about recovery prospects.

BofA Merrill Lynch lowered its 2010 growth forecast for the global semiconductor industry and downgraded 10 chipmakers, including Intel Corp (INTC.O), turning more cautious on the group on expectations of a modest overshoot in global supply chain inventories.

"While we believe the correction will likely prove short and shallow, we think any hint of a correction in the supply chain could punish (semiconductor) stocks," BofA Merrill wrote in a note to clients.

The downgrade came two weeks after Morgan Stanley analyst Mark Lipacis noted that the good news for many semiconductor stocks had already been "baked in" and PC component suppliers would have a difficult time beating expectations.

Auriga analyst Daniel Berenbaum said notions of a strong rebound for the industry next year may not be realistic.

"Things wound up better this year than some of our worst fears, but I think demand has been pulled forward," he said. "I&&9;m concerned that everybody expects a corporate PC refresh in 2010 -- maybe it&&9;ll happen, maybe it won&&9;t happen, but I do believe it&&9;s already built into stocks."

Shares of chipmakers fell across the board on Thursday. Bellwether Intel dropped 4.5 percent, smaller rival Advanced Micro Devices Inc (AMD.N) 2.7 percent and Infineon Technologies AG (IFXGn.DE) fell 7 percent. The DJ STOXX European Technology Index (.SX8P) shed 2.9 percent and the Philadelphia semiconductor index (.SOXX) fell 3.5 percent.

German chip group Infineon was bullish on its fiscal 2010 outlook, saying sales could grow by more than 10 percent if the world economy continued to grow at its present pace. But analysts weren&&9;t convinced.

Traders saw as negative remarks by Infineon Chief Executive Peter Bauer that the company would need to boost profit margins well above 10 percent as it seeks to generate sustainable earnings amid the current recovery quick cash.

"Despite Infineon beating consensus estimates, we expected better numbers for the fourth quarter, as well as a more optimistic outlook for the running quarter, following bullish statements from competitors," Sal Oppenheim analyst Juergen Wagner wrote, keeping a "reduce" rating on the stock.

Dutch chip equipment maker ASML Holding NV (ASML.AS) -- whose order book is viewed as a barometer for major chipmakers such as Intel or Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) -- also said that it still expects order intake in October-December to be at least on the same level as in the previous quarter.

But shares in ASML closed down 6.14 percent after BofA Merrill Lynch downgraded the stock to "neutral" from "buy."

Around the globe, chipmakers are recovering from a prolonged downturn. Samsung Electronics Co Ltd (005930.KS), the world&&9;s top maker of memory chips and LCD screens, in late October posted its best quarterly net profit and forecast a strong 2010 due to global turnaround in the sector.

Earlier this week, research firm Gartner raised its forecasts for the chip market in 2009, saying it now sees it falling 11.4 percent to &&6;226 billion, compared with a previous forecast for a 17 percent fall.

Next year Gartner sees the market growing 13 percent.

Taiwan&&9;s TSMC, the world&&9;s top contract chip maker, also posted its biggest quarterly net profit in a year last month and was bullish about future capital spending, aiming to invest &&6;2.5 billion on upgrading its technology.

(Additional reporting by Tenzin Pema, S. John Tilak in Bangalore; Nicola Leske in Barcelona and Hakan Ersen and Tyler Sitte in Frankfurt; Editing by David Cowell and Gerald E. McCormick)

Chip stocks fall on downgrade, CEOs talk recovery

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