If Wells Fargo's
The latest earnings season gets under way in earnest in the coming week, with four components of the Dow Jones industrial average, including JPMorgan
Hopes that the economic slump may be abating and some stabilization may be returning in the banking sector have helped underpin a month-long recovery in stocks from 12-year closing lows hit early last month.
The market is looking like it wants to continue the rally, said Andre Weisbrod, president and chief executive officer of STAAR Financial Advisors Inc in Pittsburg, Pennsylvania.
But again, so much of this depends on the news of the day. It looks like we're going to see the banks showing some improved cash flows, and that's certainly better than the opposite situation.
The benchmark S&P 500 <.SPX> achieved its fifth straight weekly gain at Thursday's close after Wells Fargo, the fourth-largest U.S. bank, gave a surprisingly upbeat preliminary view on its quarterly performance.
Wells Fargo said it expected to post a record $3 billion profit for the January-March period, and investors became hopeful that more banks would keep to the same positive tune when their results roll in.
For the holiday-shortened week, the Standard & Poor's 500 rose 1.7 percent, while the Dow Jones industrial average <.DJI> gained 0.8 percent and the Nasdaq composite index <.IXIC> climbed 1.9 percent. U.S. financial markets will be closed for Good Friday.
Looking ahead, Goldman Sachs is due to report on Tuesday, JPMorgan on Thursday and Citigroup
IS ANYBODY LENDING?
The banking sector's health has been a major worry after fallout from the financial crisis led the U.S. government to pump billions of dollars into such troubled institutions as Citigroup, which gave Wall Street a pleasant surprise last month when it said it was profitable in January and February.
With the economy mired in a protracted recession, investors are eager to see if banks have again begun lending to consumers and businesses, whose spending would serve as a crucial underpinning to an economic recovery.
The banking sector has been in focus for Wall Street for the last six months so next week sharpens that a little bit more, said Paul Nolte, director of investments at Hinsdale Associates in Hinsdale, Illinois.
The market is still going to be very focused on earnings and the health of banks, as well as what Corporate America has to say, he added.
FROM CHIPS TO CHOPPERS
In addition to bank earnings, investors also will sift through quarterly reports of other major bellwethers, particularly in the technology sector, which was mostly spared the brunt of the pain in the market's recent plunge to 12-year lows.
Chip maker Intel Corp
The earnings spotlight will also be on Dow component and health-care company Johnson & Johnson
Also on tap are motorcycle maker Harley-Davidson Inc
The short-term momentum is still bullish. This move off the March lows probably has more legs to it, said Bill Strazzullo, partner and chief market strategist at Bell Curve Trading in Boston.
But what we're telling our clients is that once you start to get above the 860 area in the S&P 500, and 8,200-8,300 in the Dow, we want to start getting out of speculative long positions and paring back our equity exposure.
DON'T GET CARRIED AWAY
Mindful of the fragility of previously attempted rallies, including one subsequent to the November lows, strategists still advocate some caution.
The backdrop for some of the wariness is the recent slide in the CBOE Volatility Index <.VIX>, or VIX, commonly known as Wall Street's fear gauge.
On Thursday, the VIX marked its lowest close since September 2008, the month that forever changed the face of Wall Street in the wake of Lehman Brothers' collapse.
The S&P 500 is up 26.6 percent from its March 9 bear market closing low, but it is still down 45 percent from its record high of October 2007.
In our opinion, this is still a bear market move. So you've got to be careful. It's been a great run over a short period of time, but we don't see it as a bigger picture change in trends, so I don't want to get careless -- not at these levels.
CPI AND HOUSING STARTS
Besides the earnings frenzy, next week's economic calendar is packed.
Highlights include March retail sales on Tuesday, along with the March Producer Price Index, followed by the March Consumer Price Index on Wednesday, along with the Federal Reserve's Beige Book, a snapshot of regional economic conditions.
Weekly jobless claims, March housing starts and the Philadelphia Federal Reserve's report on April Mid-Atlantic factory activity are all due on Thursday.
(Additional reporting by Leah Schnurr and Edward Krudy; Editing by Jan Paschal)