US stock investors will watch the earnings numbers flow in over the week ahead to see how much momentum the rally can get from early profit reports.
The first-quarter figures come as the three major US stock indexes finished a sixth straight week of gains, the best string since the rebound from 12-and-a-half-year lows in March last year, and the Dow briefly popped above 11,000 late on Friday.
Those gains could make it tough for stocks to rally further, even with expectations, according to Thomson Reuters, for Standard & Poor’s 500 companies’ first-quarter earnings to rise 36.8 percent from a year ago.
The earnings period strarts with results from Dow component Alcoa Inc after the bell on Monday.
Besides Alcoa, results are expected this week from top tech companies Intel and Google, as well as from General Electric and JPMorgan Chase & Co.
“The reaction to some of these earnings is going to be really important. If you don’t get the setback, and it trades higher, I think you’re going to squeeze another wave of buyers into the market,” said Nick Kalivas, vice president of financial research and senior equity index analyst at MF Global in Chicago.
While earnings are expected to be the focus, the upcoming week also brings the Consumer Price Index (CPI), last month’s retail sales, industrial production, housing starts and consumer sentiment reports, which will help investors gauge the speed of the economic recovery.
Other events likely to spark attention in the week ahead: US Federal Reserve Chairman Ben Bernanke testifies on the economic outlook before a congressional panel called the Joint Economic Committee, while investors will watch for signs of change in Greece’s debt crisis.
For the week, the Dow Jones industrial average rose 0.6 percent, the S&P 500 gained 1.4 percent and the NASDAQ increased 2.1 percent.
“The stock market has had a very significant rise off the [February] lows,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.
“I wouldn’t be surprised to see some near-term pullback within the context of a rising stock market,” he said.
Much stronger-than-expected earnings have helped propel the S&P 500 up more than 75 percent from March 9 last year’s closing lows. However, in the last earnings season, stocks actually lost about 3 percent as investors sold equities despite strong results.
Seventy-two percent of companies beat earnings estimates in the fourth quarter, down from a record 79 percent in the previous quarter, but still well above the 61 percent in a typical quarter, Thomson Reuters data showed.
Technical indicators point to overbought conditions heading into next week’s earnings, which could mean a pullback is in store, some analysts say.
“Short-term momentum for the Dow has been deteriorating since March 23 after reaching an overbought condition,” said Chris Burba, short-term market technician at Standard & Poor’s.
The Dow briefly rose just above 11,000 moments before Friday’s closing bell, but ended at 10,997.35, while the S&P 500 neared the 1,200 mark.
Both levels represent technical resistance, Burba said.
Bernanke is scheduled to speak on Wednesday to the Joint Economic Committee. Although data continues to show economic improvement, the Fed has reiterated its commitment to keep benchmark interest rates near zero.
Also on Wednesday’s agenda are the US CPI and the government’s data on retail sales, both for last month.
The overall CPI is pegged for a 0.1 percent rise last month from a flat reading in February, while core CPI, excluding volatile food and energy prices, is also seen up 0.1 percent, matching the previous month’s gain, according to economists polled by Reuters.
Retail sales are forecast to show a 1.2 percent rise for last month from the previous month, and minus autos, sales are expected to gain 0.5 percent from February, according to economists polled by Reuters.
Thursday’s industrial output is forecast to show a gain of 0.7 percent last month from the previous month.
Friday’s Thomson Reuters/University of Michigan Surveys of Consumers report is expected to show the preliminary index on consumer sentiment at 75 for this month. The index ended last month at 73.6.
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