Earnings could make for a bumpy ride in stocks this week if more key companies undershoot expectations, possibly causing a spike in volatility.

Disappointments from Alcoa , Google and others in the first week of earnings have dampened some of the enthusiasm about results, ensuring that eyes will be glued to reports in the coming days.

On tap this week are top technology and financial company results, including Yahoo , Intel , IBM , Texas Instruments , Goldman Sachs and Citigroup . This blitz of numbers will come during a holiday-shortened week. U.S. financial markets will be closed on April 22 in observance of Good Friday.

Market watchers also will be anxious to hear how much tech companies may have been affected by the disaster in Japan.

We've all been lulled to sleep here lately. This earnings season will hopefully be a telling point to try to give people conviction to go one way or the other, said Mike Gibbs, managing director and chief market strategist at Morgan Keegan in Memphis.

There are potential land mines out there that could create a little bit more volatile trading, he said.

The CBOE Volatility Index, a barometer of investor anxiety known as the VIX <.VIX>, briefly fell on Friday to its lowest level since July 2007. It ended at 15.32, well below its mid-March high of 31.28.

Others agreed that more disappointments could stir up volatility.

If earnings disappoint greatly from any of the major players (this week) in the financials or technical sector, this could be a catalyst for a return of volatility into the market, said Joe Kinahan, TD Ameritrade chief derivatives strategist in Chicago.

For the past week, the Dow Jones industrial average <.DJI> slipped 0.3 percent, while the Standard & Poor's 500 Index <.SPX> and the Nasdaq Composite Index <.IXIC> each shed 0.6 percent.


Whether the earnings season will be strong enough to propel the market higher is the question on investors' minds.

The Standard & Poor's 500 index <.SPX> is up 25.8 percent since the start of September, roughly when the recent rally began.

But sharp gains in the price of oil and other commodities, especially in the first quarter, have fueled worries about the impact on consumers and companies. Moreover, Japan's massive earthquake and tsunami, which triggered a nuclear crisis, have prompted other concerns.

Equity strategists at JPMorgan Chase cut their U.S. earnings estimates by $1 -- but for second-quarter and full-year results -- because of these dual headwinds.

One popular view is that the market stays in sideways motion during earnings season.

Earnings are just going to be enough to keep this market bipolar, said Mark Lamkin, CEO and chief investment strategist of Louisville, Kentucky-based Lamkin Wealth Management, with more than $200 million in assets under management.

They are going to be good enough to keep this market toward the high end of this trading range, but they're not going to be good enough to break out of a range and set the next big leg higher.


In aggregate, analysts' mean earnings forecast for the S&P financial sector for the first quarter is down 3.4 percent in the past 14 days, according to Thomson Reuters StarMine data.

It was the biggest negative change for any S&P 500 sector, while energy has seen the biggest positive change, the data showed.

The mean change in earnings estimates for Goldman Sachs is down 42.8 percent in the last two weeks, while the mean change in estimates for Citigroup Inc is down 6 percent in the last 14 days, it showed.

Analysts' mean earnings forecast for the S&P information technology sector is down 0.1 percent in the past 14 days.

Among other tech disappointments, Infosys Technologies Ltd , India's No. 2 software services exporter, on Friday forecast annual sales lower than expected.


Among others expected to report this week are several oil services companies.

Data suggests those stocks could be vulnerable to more declines as earnings expectations have come down and bearish options bets have increased lately, according to Reuters Insider quantitative analyst Mike Tarsala. Deepwater projects in the Gulf of Mexico are being approved at a slow pace.

Earnings sentiment for the group is waning, he said. Two of the sector's biggest names, Halliburton Co. and Schlumberger Ltd are due to report this week.

To be sure, many analysts still see many upside surprises ahead in this earnings reporting period, repeating the trend of recent earnings seasons.

What's happened is the global macro noise has overshadowed the fundamental earnings stories ... beneath the covers, things are actually better than people believe, said Mike Jackson, founder of Denver-based investment firm T3 Equity Labs.

Based on his own research model, he ranks industrials <.GSPI> at the top of his earnings expectations among the S&P 500's 10 sectors, followed by telecommunications.

Thomson Reuters data shows S&P 500 earnings are expected to have risen 11.7 percent from a year earlier. That estimate is roughly unchanged in recent weeks.

(Reporting by Caroline Valetkevitch in New York, with additional reporting by Doris Frankel in Chicago; Editing by Jan Paschal)