Investors are expected to look past a weak crop of earnings reports from U.S. chemical companies this quarter and focus on whether a potential economic upturn can keep shares on an upswing, analysts said.

People will be far more focused on directionally where we are going from here. Are people seeing signs of a recovery in the economy? Is the worst behind us? HSBC Securities analyst Hassan Ahmed said.

Chemical stocks in the Dow Jones U.S. chemicals company index <.DJUSCH> dropped by 50 percent in the second half of last year as the recession shrunk demand.

But analysts said the sector was typically a first mover for investors betting on an economic recovery, and the chemicals index has rallied 15 percent so far this month.

Right now investors, while they know estimates are coming down, are increasingly confident that the economy will get better in 2010, Jefferies & Co analyst Laurence Alexander said.

Commodity chemicals players -- those most exposed to energy prices and who supply materials to other companies -- are likely to suffer this quarter, while the specialty chemicals players may feel less pain, analysts said.

Deutsche Bank's David Begleiter told clients in a note that he expected U.S. chemical earnings, excluding commodity producers, which will likely lose money this quarter, on average, to fall 40 percent to 45 percent.

DUPONT, DOW UNDER PRESSURE

DuPont, which will report first-quarter results on Tuesday, is likely to see first-quarter profit at half last year's mark and revenue down 10 percent, according to Reuters Estimates.

BBT&T capital markets analyst Frank Misch recently cut his earnings on DuPont, citing continued weakness in consumer end demand, particularly for coatings, electronics, and performance materials.

Conditions at Dow Chemical , which recently bolstered its specialty chemicals portfolio with the acquisition of Rohm & Haas, are expected to follow suit.

That acquisition, which Dow completed after a lawsuit from Rohm, will pressure the company to sell assets and raise much-needed cash.

Right now, Dow has less to do with the fundamental story and more to do with how rapidly they are able to pay down the debt post Rohm & Haas acquisition, HSBC's Ahmed said.

Earnings from oil major Exxon Mobil's chemical unit will be less than 20 percent of what they were last year, according to Bank of America Merrill Lynch. Their analysts are expecting Exxon to report $172 million in earnings for the quarter, from $1.0 billion a year earlier.

That business is much smaller than Exxon's oil production arm, but still one of the largest in the United States.

Specialty chemicals makers, such as those that sell industrial gases like Air Products and Praxair
, are the best placed in the chemicals space, Jefferies' Alexander said.

These companies are better able to maintain pricing power in an environment where costs are coming down and have the most visibility on order patterns for the second half of the year, he said.

(Reporting by Hezron Selvi; Editing by Leslie Gevirtz)