By Kate Gibson

The U.S. stock market is keeping close tabs this week on financial results from major retailers, the final large market group to issue their quarterly reports -- with a recent rally in the sector setting the expectations bar high.

"The recent price action of many large retailers suggests expectations for good news from these companies is high, thus any slight disappointment could translate into a quick pullback in these names which spills more broadly across the market," Fred Dickson, chief market strategist at Davidson Co., wrote Wednesday in a note to a clients.

On Wednesday, consumer discretionary shares, which account for 9.3% of the S&P 500 Index's market capitalization, were among those advancing as the major indexes rallied more than 1%.

The Dow Jones Industrial Average (DJI) added 115.78 points, or 1.3%, to 9,357.23. The S&P 500 (SPX) gained 11.42 points, or 1.2%, to 1,005.77, while the Nasdaq Composite (RIXF) rose 29.82 points, or 1.5%, to 1,999.55.

"The retailers have had a near-40% rally off the lows and these reports could be the fuel to drive stocks higher, or pull them back," Dan Greenhaus, recently named chief economic strategist at Miller Tabak, wrote in a research note.

"Attention should be paid to the likes of Macy's Inc. and Ethan Allen Interiors Inc. (ETH) among others to see if any progress is expected with respect to consumer behavior," said Greenhaus.

"Over the next couple of days we will get a better picture of the health of the nation's retailers as several big ones report second-quarter earnings, including Wal-Mart Stores Inc., Kohl's Corp. and Nordstrom Inc. ," said Jacob Meyer, an equity analyst at D.A. Davidson & Co.

"We expect to see these retailers meet or beat analysts' earnings estimates as a result of cost cutting," Meyer added.

Wal-Mart, part of the Dow industrials, will report financial results for the second quarter ended July 31 on Thursday at about 7 a.m. Eastern time, according to a company release.