NEW YORK (Reuters) - Wall Street's push to recover from 11-year lows could hit major speed bumps this week as investors fret about the US automakers' fate and the Federal Reserve holds its last scheduled policy meeting of 2008.

The market's other big test will be the start of the quarterly reporting season for investment banks when Goldman Sachs and Morgan Stanley are expected to report heavy losses.

On the positive side, US President-elect Barack Obama's economic stimulus could reach $1 trillion over two years, far larger than previous estimates, according to a Wall Street Journal report.

Obama aides, who were considering a half-trillion dollar package two weeks ago, now consider $600 billion over two years "a very low-end estimate," the paper said citing an unidentified person familiar with the matter.

But the US auto industry's fate has been a major weight on the market after Thursday's collapse of US Senate legislation that sought to avert a possible bankruptcy by one or more of the nation's three automakers.

Without government aid, investors fear that a failure of any of the three - General Motors Corp., Ford or Chrysler - would exacerbate the year-long recession and drag other companies under.

The automakers employ nearly 250,000 people directly and 100,000 more jobs at parts suppliers could hinge on their survival.

On Friday, the White House said it was willing to consider using some of the $700 billion initially approved by Congress to shore up the financial system to help the beleaguered auto industry. But it gave no indication when that help might come.

A White House spokeswoman said early Sunday that she did not expect an announcement on an auto industry rescue plan before President George W Bush returns to the US from his trip to Iraq.

"It seems...they're going to keep the carmakers on life support in the intensive care unit until the new administration takes over," said William Stone, PNC Wealth Management's chief investment strategist in Philadelphia.

"On the other hand, maybe that doesn't help the market, either, because you will still sit there with the other uncertainty that you've got to put away the bad someday."

The bid for auto industry aid comes at the worst time as the United States prepares for President-Elect Barack Obama to be sworn in on January 20, succeeding Bush.

On Friday, concerns about the automakers' fate rattled investors, causing Wall Street to gyrate between gains and losses in a choppy session. But a rally in technology shares helped spark a late recovery.

The Dow Jones industrial average rose 64.59 points, or 0.75 percent, to end at 8,629.68 on Friday. The Standard & Poor's 500 Index gained 6.14 points, or 0.7 percent, to 879.73. The Nasdaq Composite Index climbed 32.84 points, or 2.18 percent, to 1,540.72.

For the week, though, the , the Dow dipped 0.1 percent. In contrast, the S&P 500 rose 0.4 percent and the Nasdaq finished the week up 2.1 percent.

Besides the auto sector's upheaval, the Fed's policy meeting on Tuesday and Wednesday could give investors pause amid signs the US central bank is running out of room to cut interest rates. The Fed may soon have to try other means to revive the economy, analysts said.

The Fed is widely expected to lower the benchmark fed funds rate by a half-percentage point to just 0.5 percent from one percent on Wednesday at the conclusion of its two-day meeting.

"Investors will be looking at how far they will cut, and even more important is what kind of communication they would do regarding the future course of policy," said John Praveen, chief investment strategist of Prudential International Investments in Newark, New Jersey.

Two weeks ago, Federal Reserve Chairman Ben Bernanke said the Fed could directly buy "substantial quantities" of longer-term securities issued by the US Treasury or government-sponsored agencies to lower yields and stimulate demand.

"Markets are going to be looking for how they are conducting policy forward and what are they going to say about quantitative easing," Mr. Praveen added.

As one of Wall Street's worst years comes to a close, investors will brace themselves for Morgan Stanley's and Goldman Sachs' results this week.

Analysts expect a tough fourth quarter for the two banks, and Goldman is widely expected to post its first quarterly loss since going public in 1999.

"It could be tougher sledding as far as write-offs go," said PNC's Stone.

Morgan Stanley is likely to wind up in the red for the second time in the past four quarters.

Since the S&P 500 hit its bear market low on November 21, the US stock market has increasingly showed signs of shrugging off even the bleakest of news as investors bet that the downturn could not possibly get much worse. Some believe an economic revival is likely by 2009's second half.

After the S&P slid on November 21 to its bear market intraday low of 741.02 - a level last seen in 1997 - the benchmark index has gained almost 19 percent.

For the year, the Dow is down 34.9 percent, while the S&P 500 is off 40.1 percent and the Nasdaq is down 42 percent.

The week's economic calendar is sparse, but some reports will command attention: November industrial production today; the US Consumer Price Index and housing starts, both for November, tomorrow, as well as the December reading on Mid-Atlantic business activity from the Federal Reserve Bank of Philadelphia and the latest weekly jobless claims, both on Thursday.

Overall CPI is expected to show a 1.3 percent drop in November, according to economists polled by Reuters.

On a year-over-year basis, overall CPI is seen up 1.5 percent, the Reuters poll showed.

More weakness on the housing front is forecast, with housing starts likely to slip to a seasonally adjusted annual rate of 740,000 units in November from October's record low of 791,000, according to the Reuters poll.

On the thin roster of Fed speakers this week is Richard Fisher, the president of the Federal Reserve Bank of Dallas. He is set to speak in Dallas on Thursday on "Historical Perspectives on the Current Economic and Financial Crisis."