Hazards ahead as a new quarter starts

Crisis? What crisis?

All told, your 401(k) savings balance probably doesn't look much worse for the wear and tear it has endured lately.

Stock markets worldwide continued to rebound last week from the recent plunge sparked by rising U.S. mortgage defaults and lender failures in the sub-prime loan market for people with checkered credit.

The blue-chip Standard & Poor's 500 stock index jumped 3.5% for the week and now is just 1.6% below the six-year high it set Feb. 20.

Hedge fund firm Bridgewater Associates estimates that global stock markets and other high-risk assets on average have recovered 80% of the losses they suffered in the pullback that began Feb. 27.

The average U.S. equity mutual fund is up 3% for the year, according to Morningstar Inc.

If a surge in mortgage delinquencies in the sputtering housing market isn't enough to upset investors for more than a few weeks, what would it take to give them a bigger jolt?

Here are three major risks that Wall Street is weighing as the second quarter approaches:

* U.S. consumer spending dives. Perhaps the surest ticket to a bear market in stocks would be for Americans to close their wallets -- either because they're spent out or because they're nervous about their finances or their job outlook.

This is so obvious that it might well be overlooked as a risk. Investors have no recent experience with a consumer-led recession. The last one was 17 years ago, in 1990. The 2001 recession, by contrast, was led by a plunge in business outlays.

Consumer spending accounts for more than two-thirds of U.S. gross domestic product. So if you put the consumer in a deep freeze, you almost certainly would do the same to the economy.

Since 2001 some analysts have repeatedly predicted a dramatic pullback in consumer spending. They're still waiting.

But the housing sector's woes unquestionably have raised the threat level to Americans' shop-till-you-drop habits. What had been code yellow now looks more orange-ish.

For one thing, the end of easy mortgage money means that a large number of lower-income families now can't get credit.

"When they can't borrow as much they can't spend as much," said Susan Sterne, head of Economic Analysis Associates in Greenwich, Conn.

She expects real (after-inflation) consumer spending to rise a modest 1.9% this year, down from 3.2% in 2006 and 3.5% in 2005.