Mortgage giants Fannie Mae and Freddie Mac in trouble -- PHOTOS: REUTERS

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This week is almost sure to be a rocky ride for the stock market in the United States as investors fret about the stability of Fannie Mae and Freddie Mac, the government-sponsored home finance giants.

Barring any news or development that quashes fears of capital constraints at Fannie Mae and Freddie Mac, analysts and money managers said US stocks are set to fall further into the bear market's arms.

Wall Street's eyes and ears will be trained on Federal Reserve chairman Ben Bernanke this week, when he will appear twice on Capitol Hill to give his semi-annual testimony on monetary policy. He will testify tomorrow before the Senate Banking Committee, and on Wednesday before the House Financial Services Committee.

Investors will zero in on anything Mr Bernanke says about Fannie Mae and Freddie Mac, in addition to his take on the US economy, inflation and interest rates.

'The bottom line is that we're in the middle of a financial tsunami. This is a storm the likes of which this country hasn't seen,' said Mr Peter Kenny, the managing director at Knight Equity Markets. 'The market right now needs to see results. It no longer gives anyone the benefit of the doubt.'

Fannie Mae and Freddie Mac, which own or guarantee about one in every two US mortgages and package them into bonds, are confronted by mounting losses from loan delinquencies and foreclosures. Investors fear that if they are hampered from doing business, the paralysis will only exacerbate the housing crisis.

This week will also be filled with a torrent of numbers from quarterly earnings reports and economic indicators. It will be one of the busiest weeks for quarterly earnings, with reports due from Citigroup, the No. 1 US bank, and technology bellwether Google, the leading Web search company.

Making the terrain even more treacherous for stock investors are concerns about oil's jump last Friday to a record high above US$147 a barrel, and worries that next week's data on consumer and producer prices might show rising inflationary pressures. As a result, there appears to be little to comfort investors in the short run.

Economic reports to watch include the US Producer Price Index and Consumer Price Index, industrial production and capacity utilisation, and housing starts.

'I have my helmet on and my body armour on. We expect it to be another volatile week, with the market reacting to a triple play of earnings, oil and the mortgage agencies,' said Mr Frederic Dickson, a senior vice-president and market strategist at DA Davidson.

'The market is going to remain nervous, watching developments with oil and tensions in the Middle East, and the avalanche of earnings and outlooks that will really start to hit the tape with banks and tech companies next week,' he noted.

REUTERS