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Apotheker, who gained a reputation for sharp business acumen when he headed up SAP, thoroughly flummoxed HP shareholders last week with what some analysts have called a "value destroying" $11.7 billion deal to buy British software maker Autonomy and for sticking a for-sale sign on HP's PC division -- thus scaring off clients for the year or so it will take to decide on the division's future.

In a resounding rejection of Apotheker's grand vision, shareholders sent HP shares down almost 20 percent on Friday, wiping out $16 billion of value in the worst single-day fall since the Black Monday stock market crash of October 1987.

Since Apotheker joined HP early last November, the company has lost almost 44 percent of its value, and he has lost a significant amount of investor support.

"We wonder whether activist investors will -- and should -- begin to exert pressure on the board," said Toni Sacconaghi, an analyst with Sanford Bernstein. "If HP's results don't improve, the company will ultimately restructure its portfolio and/or replace its leadership."

Pat Becker Jr., fund manager at Portland, Oregon-based Becker Capital Management Inc, which owns HP shares, noted that Apotheker has continually failed to instill confidence in his conference calls with investors.

"Every time he has gotten on the call, the stock has gone down substantially," Becker said.

On a conference call last Thursday following the announcements on Autonomy and the PC division, Apotheker failed to fully address key questions from analysts, including why HP was paying a large premium for Autonomy. When asked about the vision for HP's PC unit, he said the decision could range from an outright sale to a spinoff to a "potential "nontransaction."

"That call -- was that an 'A' performance by a CEO on that acquisition?" asked Becker, whose firm holds HP shares.

An HP spokeswoman said the "strategic transformation" is intended to position the company for a new future and drive long-term shareholder value.

While investors applaud Apotheker's long-term plan to get out of HP's commoditized PC business, and the Palm WebOS tablet and smartphone business -- considered a capital sinkhole -- that goes with it, the $11.7 billion bill for Autonomy and haphazard articulation of the spin-off strategy left many shaking their heads.

HP's purchase price is a stunningly rich 10 times sales of Autonomy, a cloud search specialist whose revenues are equal to only about 1 percent of HP's.

HP's Personal Systems Group, which includes the PC business and the now-defunct TouchPad tablet -- faces an uncertain future, which may undermine the business and benefit Dell, whose shares ended up nearly 2 percent on Friday in a broadly weak market.

Even more worrying, HP's new strategic road map marked an about-face on several crucial fronts, signaling a lack of direction. Executives as recently as May had touted how WebOS would be on every HP product from printers to PCs. In March, they had played up the advantages of serving both consumers and enterprise.

In addition, Apotheker has been forced to slash HP's sales estimates three times since he took over last November.

IN BIG BLUE'S FOOTSTEPS

It is not the first time HP seems behind the curve. it agreed to buy Compaq in 2001 in what turned out to be a rocky merger. IBM, on the other hand, transformed itself by selling its PC arm to China's Lenovo in late 2004 and establishing its dominance in enterprise IT. HP appears to be trying to replicate Big Blue's success.

Some analysts and fund managers hold out hope that the company is at least now on the right track and can still catch up by making smart acquisitions.

"Just because they didn't make the move earlier doesn't mean they still can't skate to the where the puck is going," said Tony Ursillo, an analyst with Loomis Sayles Value Fund.

But he added, "HP has overpaid for every acquisition it has made" in the past year.

One thing that could take the sting out of the steep price tag for Autonomy is the sale of HP's PC division, which industry experts estimate could fetch as much as $10 billion.

And Apotheker did make at least one correct decision by retiring the TouchPad. Sacconaghi estimates the business lost about $250 million last quarter, or 9 cents a share.

INTERNAL DISARRAY

But the events of last Thursday have done little to build confidence in Apotheker. The afternoon of high drama kicked off with a series of rapid-fire announcements: disclosure of acquisition talks with Autonomy; confirmation a deal had been done; announcement that HP was killing its TouchPad and other WebOS devices.

HP also disclosed its results an hour earlier than scheduled, marking the second straight quarter that the company had to release earnings ahead of schedule. And in another small sign of disarray, TouchPad ads featuring "Glee" star Lea Michele continued to run on CNBC on Friday.

While HP's dire competitive position was in the making well before Apotheker's arrival, shareholders do not view the CEO's track record as impressive.

"I was skeptical coming in about whether he had the right background for the job," Ursillo said. "So far the results are not encouraging."

(Reporting by Poornima Gupta; Editing by Peter Lauria, Edwin Chan and Leslie Adler)

Federal Reserve Chairman Ben Bernanke will make a speech on Friday at a lodge in Wyoming's Jackson Hole, where policymakers and academics meet once a year to talk shop.

Last year, Bernanke used the podium to suggest the Fed could help growth by buying long-term bonds, a prelude to a program enacted soon afterward that did just that.

However, no grand new plan is expected to be hatched at this year's meeting.

In part that's because the Fed already unveiled a new policy tool this month when it pledged to keep interest rates near zero into 2013.

Central banks rarely make such promises, so consider that a big move.

But the world grows more nervous every day that a new recession lurks around the corner. Economists see rising risks that U.S. growth could evaporate, while Europe languishes in a debt crisis. Even strong performers like China and Brazil show signs of slowing.

Moreover, stocks have plunged, further threatening the economy because consumers could pull back if they sense their retirement savings are dwindling.

So at the very least, Bernanke will be expected to hold our hands a little when he speaks.

"Markets are increasingly hoping there will be some signs that the Fed will coming running to the rescue," said Paul Dales, an economist at Capital Economics in Toronto.

Most economists expect Bernanke will explain what's in his policy toolbox while promising to use those tools if necessary.

Markets will hush when he begins his speech, and he will be mindful not to disappoint.

EURO BACKSTOP

One danger looming over the world economy -- and which could goad Bernanke into more action -- is the prospect that the European crisis could worsen.

Investors are nervous that some countries might not pay back their debts, so they are demanding some European governments pay higher interest rates to borrow.

Ireland, Portugal and Greece currently cannot borrow on the market, and now market forces appear to be tilting against larger countries, threatening to create a much larger crisis.

Policymakers are scrambling to contain this, with the European Central Bank buying Italian and Spanish bonds this month.

But the ECB is internally divided over that move, creating further anxiety for investors. On Monday, the central bank will release figures that could show how committed it is to propping up Italy and Spain.

A bad reaction by investors to that data -- or to revised readings due during the week on U.S. and British second-quarter economic performance -- could increase pressure on Bernanke to act.

Indeed, many people in the market expect the Fed will eventually launch QE3, the name given to what would be the third installment of a program to help the economy by buying assets on the market.

"Expectations are for more to happen. It's just a question of exact timing of when it happens," said Goldman Sachs economist Andrew Tilton in New York.

When Bernanke takes the podium, his speech will be measured against that expectation.

(Reporting by Jason Lange; Editing by Dan Grebler)

A lack of progress on some of the economy's biggest issues -- from Europe's sovereign debt to increasing signs the U.S. economy is in danger of slipping back into recession -- will drive more uncertainty and moves from one extreme to another.

However, with the S&P 500 down 17.6 percent from its 2011 high, many investors say a bottom could be near, and bargain hunters could trigger at least a momentary bout of buying.

"We're not even close to the end of volatility, but given a decline of almost 17 percent in 13 days, we could see a rise from these levels," said Mike Gibbs, chief market strategist at Morgan Keegan in Memphis, Tennessee.

"If there's something major with the European situation, that could be a catalyst for value investors to come back in."

The situation in Europe has been dictating much of the market's recent movement. Last week, shares fell on Tuesday after a meeting between the heads of France and Germany failed to squelch fears about euro-zone leaders' ability to contain the region's debt issues, which could impact global growth and the profit outlooks of U.S. banks.

Market participants will also look ahead to comments from Federal Reserve Chairman Ben Bernanke at the central bank's annual meeting in Jackson Hole, Wyoming, on Friday.

The Fed pledged this month to keep interest rates "exceptionally low ... at least through mid-2013," news that sparked a short-lived rally, suggesting that there may be little new information coming out of the Jackson Hole meeting that could move markets.

"There's nothing Bernanke can do that's likely that will help stocks," said Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc, which has $3.2 billion in assets under management.

"If you see potential bank problems out of Europe before then, he might have some ammo for another round of quantitative easing, but absent that, investors hoping for an August surprise will likely be disappointed."

AN ATTRACTIVE YIELD

The S&P 500 fell 4.7 percent last week, extending losses of 12.4 percent over the previous three weeks, its worst streak of that length in 2-1/2 years.

The CBOE Volatility Index, also known as the VIX, rose about 20 percent last week.

In a note, Birinyi Associates wrote that while the market remained difficult in the short term, there were indications that stocks were attractively valued.

Noting that the S&P 500 was 10 percent below its 50-day moving average, Birinyi said, "This is the most oversold the market has been" since March 2009.

Birinyi pointed out that the 2.25 percent dividend yield on the S&P 500 was higher than the 10-year U.S. Treasury note's yield, making this "only the second period since the 1950s where stocks have yielded more than bonds."

Last week, the 10-year note's yield fell below 2 percent during Thursday's buying frenzy; the yield fell as low as 1.978 percent -- the lowest since at least 1950. At Friday's close in New York, the 10-year Treasury note's yield stood at 2.07 percent.

DOING THE EUROPEAN "LOCK-STEP"

Issues in Europe may take on out-sized influence this week as the U.S. earnings season draws to a close, with Tiffany & Co and Applied Materials among the few S&P 500 companies on tap to report.

Earnings, while often overshadowed by macroeconomic themes, have largely come in stronger than expected, giving investors at least one reason for optimism.

This week, investors will have plenty of U.S. economic indicators to watch, including the release of data on new home sales data, durable goods orders, consumer sentiment and gross domestic product. Should the data follow the recent trend of weak reports, which have contributed to the growing sense that growth will be muted, it could cause further selling.

"There's still something of a sense that this is just a weak patch in the economy, but prolonged weak data would point more definitely to a double dip," said Marc Scudillo, managing officer at EisnerAmper in New York. "There's a good floor to the S&P 500 at 1,100 right now. If we go under that, there's room to move even further to the downside."

While U.S. growth concerns remain a primary focus for investors, the issues in Europe are seen as the primary driver of the U.S. stock market in the near-term.

Last week, stocks fell on Tuesday as the leaders of France and Germany failed to discuss boosting the size of the euro zone's rescue fund or the sale of euro bonds, though they detailed closer euro-zone integration. Many investors believe more aggressive policies are needed to restore stability to the area.

"What I'm seeing right now is basically a crisis of confidence, more so than an economic crisis or financial crisis necessarily at this stage," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland.

Trunow, who helps oversee about $14.8 billion in assets, cited "the inability by policy-makers to come to a good path" as the reason for the uncertainty.

Morgan Keegan's Gibbs said that the endgame in Europe was that "if confidence doesn't return, we'll continue to see the S&P essentially moving in lock-step with European markets."

(Reporting by Ryan Vlastelica; Editing by Jan Paschal)

"Euro bonds are exactly the wrong answer to the current crisis," German Chancellor Angela Merkel told ZDF public broadcaster in an interview on Sunday. "They lead us to a debt union and not to a stability union," she added.

Germany, which enjoys lower costs for issuing debt than its single currency partners, has led resistance to common euro-denominated bonds.

That puts it at odds with a number of partners, including Belgium and Italy, and the European Commission, which this week said it was still studying the feasibility of such bonds and may present draft legislation for them.

Merkel's comments on Sunday chimed with those of her finance minister earlier this weekend. Wolfgang Schaeuble said the euro zone could only issue joint debt if it had common fiscal policy or risk creating inflation and destabilizing the currency bloc.

Pressure on Germany and France to take radical action on the debt crisis mounted this week as financial markets sagged further and Belgium added its support to calls for the region to issue euro bonds.

Merkel said the solution to the current crisis was in closer economic cooperation in Europe and especially in the euro zone.

"The euro zone has to work even more closely together but we also have to work together closely within the Europe of 27," she said. "Our currency is not substantiated by a political union. Now the task is to make the euro strong through more economic cooperation and especially more commitment."

READY FOR EUROPEAN MINISTER

In line with that Schaeuble said in a newspaper interview he still had hope the euro could lead to a political union.

He was personally prepared to pass national sovereignty to Brussels to secure the long-term stability of the euro zone but conceded that the currency bloc was not ready for it yet.

"As a private person, Wolfgang Schaeuble would already be ready to (delegate sovereignty to Brussels). I have no problem with the idea of a European finance minister," he told Welt am Sonntag newspaper published on Sunday.

"But as a finance minister I say: it is our task here and now to solve the problems as quickly as possible based on the existing contracts."

Some EU experts say it would be a long drawn-out process -- not least to address the legal issues -- to change EU laws to allow a finance minister to have influence over national budgets or for the bloc to issue common debt, and it would take too long to help in this crisis.

The chief executive of Germany's second-largest lender Commerzbank, Martin Blessing, on Saturday called for a European finance minister, a suggestion first made by European Central Bank head Jean-Claude Trichet in June, with sway over national budget and fiscal decisions.

Blessing also said a bundle of crisis measures proposed by Merkel and her French counterpart Nicolas Sarkozy this week were not enough.

One of those measures, which Schaeuble and his French counterpart Francois Baroin will discuss next week, is a EU-wide financial transaction tax, which Schaeuble would be willing to limit to the euro zone if it did not get the support of the entire bloc.

However, that has come under fierce criticism, with Merkel's junior coalition partners the Free Democrats saying they will only support the tax if it is EU wide, not euro-wide.

The German banking association says the tax is inefficient as it would prompt professional traders to simply avoid trading within the zone, while the association of savings bank supported the tax, saying it would hit in particular speculative trades.

Schaeuble also said the European Financial Stability Facility did not need to be expanded once it buys back sovereign bonds of troubled member states.

"As soon as it is clear that the euro zone members defend the euro, there will be less speculation," Schaeuble said. "Therefore there will be fewer bond purchases and the necessary sums will sink."

NO RECESSION IN SIGHT

Germany has been Europe's star performer in industrialized world since the end of the 2008 financial crisis and its swift recovery has helped stimulate European trade partners.

However, even its economy has now slowed, growing by 0.1 percent in the second quarter of the year, but Merkel tried to assuage worries that momentum in Europe's largest economy could slow even further.

"I believe we have the chance to continue the path of a pickup," she told ZDF. "I can only say I see nothing that points toward a recession in Germany."

(Reporting by Annika Breidthardt; Editing by Hans-Juergen Peters)

The government may also intervene unilaterally again in the currency market to weaken the yen, although analysts doubt whether such moves can alter a broad weak dollar trend.

A senior government official expressed Tokyo's readiness to step into the currency market to stem yen rises if necessary, saying that recent moves have been speculative.

"Japan's stance is consistent in that it will take decisive action depending on market developments," the official told Reuters on Sunday.

The central bank loosened policy just two weeks ago to ease the pain of persistent yen strength on the export-reliant economy, and has expressed its readiness to act again if the prospects of a moderate economic recovery come under threat.

After the yen rose to a fresh record high against the dollar last Friday, BOJ officials will scrutinize Asian market moves on Monday and start debating whether the potential harm from recent yen gains warrants further policy action.

The BOJ's next regular rate review is on September 6-7.

But the chance of it easing its already super-loose policy before that cannot be ruled out, depending on market developments, sources familiar with the BOJ's thinking say.

"We will act swiftly, if needed, with an eye on economic conditions," one of the sources said.

Still, a brief yen spike to fresh records alone would not trigger immediate BOJ action.

For the BOJ to call an emergency policy meeting, it would take a sustained yen rise above 76 to the dollar, accompanied by falls in Tokyo stock prices that are sharp enough to hurt business confidence, the sources say.

"The BOJ doesn't target currency rates but deals with the effect of exchange rate moves. The trigger for monetary easing would be a severe deterioration in sentiment," another source said. Both sources spoke on condition of anonymity due to the sensitivity of the matter.

If the BOJ were to ease policy, the most likely option would be to expand its 50 trillion yen ($656 billion) pool of funds to buy government and private assets and offer cheap fixed-rate funds via market operations. The pool was expanded when the BOJ eased policy earlier this month.

FIRMS FEELING THE PAIN

Tokyo intervened unilaterally in the currency market and eased monetary policy on August 4. But the steps have not stopped investors from seeking the yen as a safe haven against risk, with the dollar hitting a record low of 75.95 yen on Friday. It later bounced back above 76 yen.

Japanese policymakers have continued to issue verbal warnings to markets against pushing the yen up too high, and do not rule out intervening again if they see moves as speculative.

But the effectiveness of any solo intervention would be limited, with very little chance that Japan's G7 partners would agree to jointly step into the market to halt a grinding rise in the yen, analysts say.

Some in the government and the BOJ are cautious about using their depleted policy options now, given a host of events that could easily wipe out the impact of any steps they take.

Among them is Federal Reserve Chairman Ben Bernanke's speech on August 26 at Jackson Hole, Wyoming, where he may signal the chance of further monetary stimulus, and U.S. payrolls data on September 2.

The government, however, cannot afford to stand pat, mainly for domestic reasons. The dollar is well below the 80 yen level that many exporters made the basis for their earnings forecasts for the current financial year to next March.

Many Japanese exporters, who over the years have cut costs to offset the damage from yen gains, say current yen rises are beyond what they can take and may shift production overseas.

A strong yen has benefits such as cutting import costs and making overseas M&A cheaper for Japanese firms. But a yen rise now is painful for many manufacturers banking on a swift recovery in the second half of this year, when supply constraints from the March earthquake and tsunami ease.

Toyota Motor Corp (7203.T), Japan's biggest car maker, says every 1 yen rise against the dollar cuts its annual operating profit by 30 billion yen. Honda Motor Co (7267.T), the country's third-biggest auto maker, is studying possible production bases overseas to replace export-bound car production in Japan.

"Protecting Japanese manufacturing and building cars here is becoming more and more difficult," Honda Chief Financial Officer Fumihiko Ike said earlier this month.

The government plans to come up with a package of steps to ease the pain in a third extra budget, such as offering cheap loans to small firms hit by the yen's rise.

But progress may be slow as ruling party lawmakers are maneuvering to select a successor to unpopular Prime Minister Naoto Kan, who is expected to step down as early as the end of this month.

With at least seven ruling party lawmakers -- including Finance Minister Yoshihiko Noda -- eyeing the nation's top job, the outlook for who will take the helm is unclear, as well as how the next leader will address the yen's rise.

($1 = 76.245 Japanese Yen)

(Additional reporting by Taiga Uranaka, Linda Sieg and Tokyo policy team; Editing by Yoko Nishikawa and Edmund Klamann)