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Traders juggling European debt worries and soft economic data are now staring at satellite images, tracking the path of Hurricane Irene, expected to hit New York over the weekend.

The unusually large storm traveled up the U.S. East Coast on Friday, threatening 55 million people, and was expected to cause billions of dollars in property damage.

Major U.S. exchanges are preparing to deal with power outages and flooding, and that could affect trading on Monday.

For now at least, the NYSE and Nasdaq expect to be open for trading as usual on Monday morning. The Big Board said a final decision will be made Saturday or Sunday, particularly on its trading floor in the low-lying financial district of Manhattan, which could see a storm surge and flooding.

One senior trader at a proprietary trading firm in New York said Friday that Hurricane Irene had destroyed any chance of a rally that had looked likely, given the extent of short positions that had been building in equity markets.

"If this hurricane is a disaster, my guess is we are going to be down 30-40 handles on Monday," he said.

Property insurers Allstate and Travelers hit two-year intraday lows on Friday, partly on worries over claims due to the hurricane.

"We intend to be open, but Mother Nature may have other plans," said Lou Pastina, executive vice president of NYSE operations.

After that, the focus may shift from the Federal Reserve's economic outlook to the August payrolls report next Friday.

Fed Chairman Ben Bernanke, in a much anticipated address to central bankers in Jackson Hole, Wyoming, said most of the burden for ensuring a solid foundation for long-term growth lay at the feet of the White House and Congress.

President Barack Obama is expected to detail plans to create jobs after he returns from vacation the week after next. Investors will have a few days to position themselves ahead of Obama's speech, with the key payrolls report for August due Friday.

"This was clearly a punt from Bernanke to Obama, who will announce a jobs initiative soon," said Lance Roberts, CEO of Streettalk Advisors, an investment management firm in Houston. "The market thinks we may now get stimulus from the government."

THE WHITE KNIGHT: TRICHET?

In a move opposite to Bernanke's baton-handing to Washington, some say stocks may find a white knight in the European Central Bank's head Jean-Claude Trichet.

Scheduled to speak on a panel at Jackson Hole, Wyoming, on Saturday, Trichet could open the door for the ECB to buy more bonds from countries struggling with rising borrowing costs.

News earlier this month that the ECB was actively buying government bonds in the secondary market boosted equities by giving some relief to investors worried about the credit and fiscal health of the euro zone.

"I'm going to see if (Trichet) is standing by that policy or shying away from it," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

"If he stands by it, that could be a positive for the equities markets because it's going to suggest that if anything, the ECB will try to step in to handle liquidity problems on the European banking system and they don't have to just rely on the European Union leaders."

Recent concern over the exposure of some European banks to the declining prices of euro-zone bonds pushed lenders' shares

sharply lower, with an index of European bank stocks closing lower on Friday for a fifth straight week. The long slide has resulted in European bank shares losing more than one-fourth of their market value.

AN UGLY AUGUST

August is shaping up as the worst month for stocks since February 2009, partly on the belief that the economy was headed for a double-dip recession.

For the month so far, the Dow Jones industrial average is down 7.1 pct, while the Standard & Poor's 500 Index is down 8.9 percent. The Nasdaq Composite Index is down 10 percent, still in correction mode. Those losses for August so far threaten to overshadow the bright spot at Friday's close, when all three indexes ended the day higher and scored their first weekly gains in more than a month.

The payrolls report on Friday is expected to show the U.S. economy created 80,000 jobs this month, according to economists polled by Reuters. In contrast, a total of 117,000 jobs were added to U.S. non-farm payrolls in July.

The U.S. unemployment rate is seen steady at 9.1 percent.

Wall Street will have to deal with a torrent of data throughout the week, including personal income and consumption on Monday, S&P/Case-Shiller home prices on Tuesday, factory orders on Wednesday and the Institute for Supply Management's factory activity index on Thursday.

A Reuters poll forecasts that ISM's August survey is expected to show factory activity shrank for the first time since the recession.

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be e-mailed to: rodrigo.campos(at)thomsonreuters.com)

(Reporting by Rodrigo Campos; Additional reporting by Jonathan Spicer, Edward Krudy and Ryan Vlastelica; Editing by Jan Paschal)

Bernanke said the central bank had marked down its outlook for U.S. economic growth and made clear the policy focus was still on spurring a stronger recovery, but he did not provide any fresh details on steps the Fed could take.

"It is clear the recovery from the crisis has been much less robust than we had hoped," he said.

Bernanke's speech at an annual Fed conference here met with a mixed reception in financial markets, where some had hoped he would make a clear case for a further easing of monetary policy.

Stocks initially fell, with the blue chip Dow Jones industrial average dropping as much as 220 points, but later turned higher to trade roughly flat. The dollar and bond prices rose.

"The growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years," Bernanke said. "The economic healing will take a while, and there may be setbacks along the way," he added. "However ... the healing process should not leave major scars."

While expressing long-term optimism, Bernanke made plain the central bank found recent developments troubling, and he said the policy-setting Federal Open Market Committee would expand its September meeting to two days from one to discuss its options.

However, he also stressed that most of the burden for ensuring a solid foundation for long-term growth lay at the feet of the White House and the U.S. Congress.

He said investor concerns over Europe's debt and political fights on the U.S. budget had harmed growth prospects.

"Financial stress has been and continues to be a significant drag on the recovery, both here and abroad," he said. "It is difficult to judge by how much these developments have affected economic activity thus far, but there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth."

Julian Callow, an economist at Barclays Capital in London, said incoming economic data would determine if the Fed moves to provide further support for the sputtering recovery.

"He was rather boxed in terms of what he could say," Callow said. "The markets have been increasing pressure on him to say more, but he needs to take the FOMC with him."

Earlier this month, the Fed said it expected to hold overnight U.S. interest rates near zero for at least the next two years, a move that elicited a rare three dissents.

RECESSION WATCH

Some investors have begun to hope the central bank, which has already bought $2.3 trillion in bonds, would launch a fresh round of asset purchases, although many analysts think more modest steps, such as shifting the Fed's securities holdings into longer maturities, are more likely.

Bernanke simply reiterated language from the Fed's latest policy statement that the central bank was examining its options and was prepared to act as needed.

"Monetary policy must be responsive to changes in the economy and, in particular, to the outlook for growth and inflation," he said. He repeated the Fed's view that easing commodity prices should bring inflation into line with the Fed's 2 percent or under goal.

A weak raft of economic data have led economists to say chances of a fresh U.S. recession could range as high as 50 percent.

The economy grew at a paltry 1 percent annual rate in the second quarter as consumer spending notched its smallest gain since the final three months of 2009, the government said on Friday. It grew only 0.4 percent in the first quarter.

At the same time, Europe is strangled by a debt crisis that is undercutting growth prospects there.

As gloomy news on the U.S. economy mounted in recent weeks, stock markets plunged and speculation grew the Fed would crank up its crisis-fighting operation. The yield on the 10-year Treasury note hit a new low.

In an interview with CNBC before Bernanke's remarks, Philadelphia Federal Reserve Bank President Charles Plosser said further bond purchases by the Fed would do the economy little good.

"I'm not sure it would be beneficial to the problems that we are facing," Philadelphia Federal Reserve Bank President Charles Plosser told CNBC. Plosser, a noted inflation hawk, was one of the officials who dissented at the Fed's August 9 meeting.

A BALANCE SHEET FIX

Fed officials have discussed buying more longer-term debt and selling short-term securities, an operation that could increase downward pressures on long-term interest rates without further bloating the central bank's balance sheet.

Long-term Treasury yields are an important benchmark for home loans, and they could encourage home buying. In addition, a shifting in the Fed's portfolio could push some yield-hungry investors into other assets, such as stocks and corporate bonds, perhaps spurring stronger spending.

But some officials think an effort to "twist" down the longer end of the interest rate curve might do little good.

"A twist operation would not have every much effect. It's been analyzed many times," St. Louis Federal Reserve Bank President James Bullard told Reuters. Bullard made clear he would prefer another round of bond purchases if the Fed felt it had to ease monetary policy again.

Bernanke said the economy could benefit over the long haul by putting the U.S. budget on a sustainable path. However, he repeated a warning that tightening fiscal policy too soon could harm the currently fragile recovery.

(Writing by Mark Felsenthal and Tim Ahmann; additional reporting by Leah Schnurr; Editing by Neil Stempleman)

His opening remarks will be widely watched by financial markets hoping for some indication the central bank is prepared to step in to support an economic recovery that appears at risk of stalling.

Bernanke, however, is unlikely to announce a third round of Fed bond buying. The Fed has already bought $2.3 trillion in longer-term securities -- a policy known as quantitative easing. Its most recent program, dubbed QE2, ended in June.

But he is likely to acknowledge the economy's strains, and may show a willingness to take other, relatively modest, steps to shore up the recovery.

"If people in the marketplace think he's going to announce QE3, they're going to be disappointed," said Bank of America Chief Economist Mickey Levy, speaking in the lobby of the Jackson Lake Lodge, where the annual retreat is being held.

The U.S. economy braked sharply in the first half of the year, expanding at less than a 1 percent annual rate. Analysts do not believe it is faring much better now.

At the same time, Europe is strangled by a debt crisis, and both major economic zones appear at risk of recession.

As gloomy news on the U.S. economy mounted in recent weeks, stock markets plunged and speculation the Fed would crank up its crisis-fighting operation grew. The yield on the 10-year Treasury note hit a new low.

So far in August, the Standard & Poor's 500 Index has fallen 10 percent -- a figure that papers over some of the gut-wrenching daily drops and mind-bending volatility.

However, stock market investors spent much of this week driving share prices higher on the premise that the Fed would have to begin to snap up more bonds to push borrowing costs lower. The S&P rose nearly 5 percent through Wednesday before the reality began to set in on Thursday that Bernanke was unlikely to lay out any bold policy initiatives.

A BALANCE SHEET FIX

While Bernanke is expected to stop short of offering a grand economic fix, he may well signal a willingness to adjust the central bank's $2.8 trillion portfolio to try to get more bang for each buck.

Fed officials have discussed buying more longer-term debt and selling short-term securities, an operation that could increase downward pressures on long-term interest rates without further bloating the central bank's balance sheet.

Beyond providing a psychological boost, lower long-term rates could encourage home and car purchases, and business investments.

"These are small moves," said Wells Fargo economist John Silvia, one of many conference attendees milling about the lodge before the start of the conference on Thursday. "This is not the time to put up full sails."

Even some Fed policymakers admit changing the Fed's holdings to twist down the longer end of the interest rate curve might do little good.

"A twist operation would not have every much effect. It's been analyzed many times," St. Louis Federal Reserve Bank President James Bullard told Reuters on the conference sidelines.

A FISTFUL OF DOLLARS

Over the last five turbulent years, Bernanke has used his speeches at Jackson Hole to assure the public the Fed stood ready to come to the economy's aid.

Last year, he laid groundwork for the Fed's November decision to launch a second bond-buying spree. Although there will be no less attention to his remarks this year, conditions have changed.

Inflation is higher and the risk of a vicious deflationary cycle is lower. While growth is weak, Fed officials do not appear particularly concerned about recession risks.

"We will continue on this modest growth path as we go forward," said Kansas City Fed President Thomas Hoenig. "It's not exciting, but it's not a recession.

However, a series of regional factory surveys have suggested manufacturing sector, which has powered the recovery, may be contracting, and jobs growth continues to fall short of what is needed to lower an unemployment rate stuck above 9 percent.

In addition, sovereign credit strains in Europe have not gone away, adding to an overall sense of uncertainty many think is keeping consumers and businesses on the sidelines.

With that as a backdrop, economists increasingly think further Fed easing may not be far off.

(Reporting by Mark Felsenthal; Editing by Leslie Adler)

U.S. Federal Reserve Chairman Ben Bernanke is due to address central bankers at an annual symposium in Jackson Hole, Wyoming, at 1400 GMT. His speech last year laid the groundwork for the Fed's $600 billion bond-buying program to revive the economy.

Bernanke is unlikely to announce a third round of bond buying. The Fed has already bought $2.3 trillion in longer-term securities, a policy known as quantitative easing. Its most recent program, dubbed QE2, ended in June. But he could acknowledge the economy's strains and may show a willingness to take other, relatively modest, steps to shore up the recovery.

James Bullard, president of the St. Louis Fed, said on Thursday that a bid by the Fed to lower long-term interest rates further by rebalancing its portfolio would probably not have much impact.

The Commerce Department will release its second reading of U.S. second-quarter GDP data at 8:30 a.m. EDT, with economists forecasting a 1.1 percent annualized pace of growth, against 1.3 percent growth in the first reading.

North Carolina braced on Friday for a direct hit from Hurricane Irene, cities along the U.S. east coast were on alert and millions of beach goers cut short vacations to escape the powerful storm.

Preliminary second-quarter corporate profits data is due at 8:30 a.m. EDT. In the revised Q1 report, corporate profits rose 1.2 percent.

American International Group (AIG.N) Chief Executive Robert Benmosche has complained to senior executives at investment banks about the "unfavorable research" of the insurer's stock, the Wall Street Journal said, citing people familiar with the matter.

At 9:55 a.m. EDT, Thomson Reuters/University of Michigan Surveys of Consumers release the August final consumer sentiment index. Economists in a Reuters survey expect a reading of 56.0 compared with 54.9 in the preliminary August report.

Luxury jeweler Tiffany & Co (TIF.N) is due to announce results.

The top official behind Standard & Poor's downgrade of the United States said on Friday it was not to blame for August's stock market rout, and warned that developed nations still needed to "get their act together" to tackle their mountains of debt.

European shares .FTEU3 fell 0.7 percent in early trade on Friday on nervousness ahead of Bernanke's speech, while Japan's Nikkei stock average .N225 rose 0.3 percent on bargain-hunting.

The Dow Jones industrial average .DJI dropped 170.89 points, or 1.51 percent, to 11,149.82 on Thursday. The Standard & Poor's 500 Index .SPX fell 18.33 points, or 1.56 percent, to 1,159.27. The Nasdaq Composite Index .IXIC lost 48.06 points, or 1.95 percent, to 2,419.63.

(Reporting by Atul Prakash; Editing by Hans-Juergen Peters)