MARKET SNAPSHOT: Stock Investors Look For Crush Of Earnings Ahead

By Kate Gibson

The U.S. stock market faces a massive onslaught of earnings in the days ahead, after getting a major lift from surprisingly upbeat results from a slew of big-name players, helping the major indexes to a 7% gain last week.

While the market saw some profit-taking on Friday as it headed into the weekend, the pendulum, which swung to the negative side in late June, "has decisively swung back in mid-July," said Marc Pado, U.S. market strategist, Miller Tabak.

Last week had financial powerhouse JP Morgan Chase & Co. (JPM) and IBM Corp. (IBM) delivering large positive earnings surprises. The stream of better-than-expected results also included General Electric Co. (GE), Bank of America Corp. (BAC) and Citigroup Inc. (C).

Others turning in like results including Baxter International Inc. (BAX) and Marriott International Inc. (MAR)

U.S. stocks on Friday ended mixed, but the Dow Jones Industrial Average (DJI) tallied a weekly gain of 7.3%, the S&P 500 Index (SPX) scored a 7% rise from the prior Friday's close, while the Nasdaq Composite (RIXF) added 7.4%.

Technical charts indicate the market is at the end of a big bear market, according to Ed Yardeni, chief investment strategist at Yardeni Research Inc.

Commodities gained along with equities, with crude-oil futures rising more than 6% for the week to close above $63 a barrel. .

Treasury prices turned lower, pushing yields to their biggest weekly jump in more than a month.

"Keep in mind that several of the financial institutions reporting good earnings this week have enjoyed a nice uptick in investment banking but do not have to deal with the negative ramifications of mark-to-market accounting of derivative holdings that wrecked havoc on financial earnings over the last couple of years," said Fred Dickson, chief market strategist, Davidson Cos.

"We believe that most of the positive market action relates to investors and traders being surprised by the number and consistency of positive earnings surprises coming from the big names that reported [last] week," said Dickson.

"We still are very early in earnings reporting season and will be anxious to see how second-tier companies with primarily domestic business models fared during the quarter and what they see for the next couple of months. We suspect that the news from these smaller less visible companies may not have the luster" seen last week, he added.

Another cautionary note came from Peter Boockvar, equity strategist, Miller Tabak & Co., who said while companies are topping earnings-per-share estimates, many are missing revenue estimates.

"It's a tribute to corporate America's ability to keep a lid on costs and improve margins but also highlights the tough economic environment," Boockvar said.

More to come

The coming week brings another wave of quarterly reports, starting off with slated releases on Monday from a broad array of sectors, including industrial manufacturer Eaton Corp. (ETN), toymaker Hasbro Inc. (HAS), and oil services giant Halliburton Co. (HAL), among others.

Texas Instruments Inc. (TXN) and Zions Bancorp (ZION) both are expected to report after the close.

Tuesday brings an avalanche of quarterly reports from companies including DuPont (DD), Caterpillar Inc. (CAT) and Continental Airlines Inc. (CAL). UnitedHealth Group Inc. (UNH) and Western Union Co. (WU) are also on Tuesday's calendar, while technology firms Apple Inc. (AAPL) and Advanced Micro Devices Inc. (AMD) are poised to report after the closing bell.

Microsoft Corp. (MSFT), McDonald's Corp. (MCD) and American Express (AXP) are among the stream of companies reporting later in the week.

Last week's developments unrelated to earnings had eyeing CIT Group Inc. (CIT), which ended talks with the government over a financial lifeline to stave off what could prove to be the third largest bankruptcy ever.

On Friday, CIT was reportedly in talks with JPMorgan Chase (JPM) and Goldman Sachs Group Inc. (GS) on securing financing, with its shares rallying as a result.

Pado for one argued the government's apparent refusal to come to the small business lender's rescue could be viewed in a positive light for the market.

"What this tells investors is that the Fed and Treasury now see the U.S. economy as healthy enough to withstand a major failure. The government has seen marked improvement across many sectors, and its refusal to bailout CIT can be viewed as a perverse positive vote of confidence in the U.S. economy," the analyst said.

"The economy appears fragile outside of the technology sector and credit risks linger, especially given the stress on CIT," said Nick Kalivas, an equity analyst at MF Global Research.

But Kalivas has a mixed take on the situation, saying bankruptcy would not necessarily be a bad thing if the company continues to function and provide liquidity. If not, "there could be a credit crunch for many middle market companies," he said.

Capitol Hills

And, beyond wading through the mass of earnings reports slated for release during the next three weeks, investors are trying to decipher the potential impact of proposed health care and energy legislation now working its way through Congress.

On Tuesday, Federal Reserve Chairman Ben Bernanke will head to Capitol Hill to deliver his semiannual testimony to the House Financial Services Committee.

"While there is no doubt Mr. Bernanke will be reserved in his outlook, the Fed did just moderately upgrade their GDP forecasts and one imagines Mr. Bernanke will spend some time explaining why the Fed believes the economy will grow 2.1% to 3.3% in 2010 as opposed to 2.0%-3.0%, said Dan Greenhaus, an analyst with Miller Tabak's market strategy group.

"We expect Chairman Bernanke to present a more upbeat outlook on activity and inflation," wrote Barclays Capital Research analyst Dean Maki and colleagues in a research note.

Many analysts believe Bernanke's words will draw more market attention than economic data, which starts on Monday with leading economic indicators for June, followed by existing home sales and weekly jobless claims on Thursday and an index of consumer sentiment in July on Friday.