Fasten your seatbelts. Stock investors could be in for a bumpy ride next week with widely watched inflation gauges likely to dictate the market's direction.

Worries about inflation and rising interest rates drove stocks down sharply late this week as gold hit a 26-year high and the Fed failed to give Wall Street a clear signal that it was ready to pause after nearly two years of raising rates.

Any signs of further price pressures on the economy in next week's data on consumer and producer prices could give investors more reason to sell.

"Investors are just going to be very sensitive to any type of overheating of the economy," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Wealth Management in New York. "Any pickup on any inflation numbers will be magnified."

The U.S. Producer Price Index for April, expected at 8:30 a.m. on Tuesday, and the Consumer Price Index, scheduled for release at the same time on Wednesday, will be among next week's most important economic indicators.

Economists polled by Reuters forecast that overall PPI went up 0.8 percent in April, and core PPI, excluding volatile food and energy prices, rose 0.2 percent. They see overall CPI up 0.5 percent in April, and core CPI, up 0.2 percent.

Mixed Message From the Fed

The Federal Reserve gave the market a mixed view this week of future interest-rate policy, saying more rate hikes may be needed while leaving the door open to a possible pause in its nearly two-year campaign of tightening credit.

The news cooled bullish stock market momentum that had pushed the Dow Jones industrial average up earlier in the week to within 100 points of its all-time high of 11,750.28, set on Jan. 14, 2000.

The Fed has raised rates 16 times since late June 2004. It boosted the benchmark federal funds rate this week to 5 percent, as expected. But the Fed caught Wall Street off guard by saying future moves would depend on how the economic outlook unfolds.

Analysts said that could mean increased market volatility as investors will be even more focused on economic data in the coming weeks.

Friday's economic data failed to dispel investors' worries about rising inflation and interest rates, which on Thursday sparked stocks' biggest decline in nearly four months. Among Friday's reports, Labor Department data showed U.S. import prices surged 2.1 percent in April, exceeding expectations.

"Until the Fed quashes the notion that they're getting behind the curve on inflation, there will be turbulence in the market," said Jeff Schappe, chief investment officer at BB&T Asset Management in Raleigh, North Carolina.

For the week, the Dow Jones industrial average fell 1.71 percent, while the Standard & Poor's 500 Index dropped 2.62 percent and the Nasdaq Composite Index slid 4.24 percent.

Housing starts and building permits for April also are due on Tuesday, along with April numbers for U.S. industrial production and capacity utilization.

"I believe the slowdown in housing will be reflected [in the housing starts] report, and that will make the market a little more comfortable with the view that the Federal Reserve can justify a pause when it meets in June," said Anthony Chan, chief economist at J.P. Morgan Private Client Services.

Gold, Oil and Inflation

Skyrocketing gold prices and persistently high oil prices have put inflation back on top of the worry list for investors. New York gold futures jumped on Friday to $732 an ounce and crude traded at around $72 a barrel.

For gold, that was the highest price for a front-month futures contract since January 1980 when it hit a record of $850. That sends a chill through investors who remember that the prime rate hit 21.5 percent in December 1980. This week, big U.S. banks raised the prime rate to 8 percent.

"I think $700 gold is starting to spook people. It's usually a harbinger of global inflation trends ... That's going to flash red in the minds of some portfolio managers," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co. in Lake Oswego, Ore.

This week, the price of U.S. crude for June delivery rose 2.6 percent to settle Friday at $72.04 a barrel.

Concerns about oil producer Iran's nuclear ambitions, fuel supplies heading into the U.S. vacation season, and a pipeline explosion on Friday in Nigeria, another major oil-producing country, have kept crude prices high.

"The equity market will continue to watch oil prices, and oil prices so far have been unfriendly," Chan said.

Earnings Wrap: Tech and Retail

Computer maker Dell Inc. (DELL), whose profit warning this week jolted the tech sector along with negative outlooks from other companies, could again put investors on edge when it reports earnings on Thursday.

Rival Hewlett-Packard Co. (HPQ), a Dow component, is set to report results on Tuesday.

Earnings from major retailers, including Wal-Mart Stores Inc. (WMT), Target Corp. (TGT), and Limited Brands (LTD), also are expected next week.

Their financial scorecards come at the end of a mostly stronger-than-expected first-quarter earnings reporting period. About 69 percent of the 456 S&P 500 companies that have reported first-quarter earnings so far have exceeded analysts' estimates, compared with about 66 percent a year earlier, according to Reuters Estimates.

First-quarter earnings are forecast to increase about 14 percent from a year ago, Reuters Estimates said.