The stock market is set to continue its winning ways in the coming week as momentum builds during earnings season.

The latest quarterly reporting period is off to a strong start, but this week will be crucial to hopes that revenue growth has returned triumphant, as opposed to earnings surprises resulting mostly from cost-cutting.

Six Dow components and some of the biggest banks are in line for scorecard reporting. This time last quarter, during the first full week after Alcoa's results, the Standard & Poor's 500 index <.SPX> rose 7 percent to close at 940.38 on Friday, July 17. It has not had a better week since, but if earnings continue the trend established by early results, investors may keep buying stocks.

There's enough room for upward movement, said Kim Caughey, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. Not another 60 percent, but still.

Expectations of economic recovery have fueled a nearly 60 percent gain in stocks since the doomsday levels of early March. On Friday, the Dow Jones industrial average <.DJI> hit a fresh 2009 closing high at 9,864.94, while the S&P 500 ended at 1,071.49 and the Nasdaq finished at 2,139.28. For the week, the Dow was up 4 percent, while both the S&P 500 and the Nasdaq advanced 4.5 percent.

But such a breathtaking rally has some analysts wondering if the stock market has too much good news priced in. Analysts' expectations are loftier this time around, removing one of the catalysts that buoyed the market in the last two periods.

The concern is heightened by the fact that analysts have been revising estimates up at one of the most aggressive paces in over a year, said Carmine Grigoli, chief U.S. investment strategist at the equity division of Mizuho Securities USA Inc in New York.

This was not the case in the last two earnings reporting seasons, when the market did so well.

Despite the revisions in various sectors, earnings are expected to fall more than 25 percent compared to a year ago, according to data compiled by Thomson Reuters. Arguably, the bar is still set low, even if people have already factored this into projections.

Earnings should support the market averages where they are and maybe give a minor boost, said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co in Lake Oswego, Oregon.


Some of the big corporate names scheduled to post earnings this week are Intel Corp and Johnson & Johnson on Tuesday, JPMorgan Chase & Co on Wednesday, Goldman Sachs and IBM on Thursday and Bank of America and General Electric on Friday.

Investors will be watching to see if IBM and Intel benefit from the weak dollar; the companies garner substantial revenue from overseas. IBM is expected to post earnings of $2.38 per share on revenue of $23.38 billion, while Intel is forecast to earn 27 cents a share on $9.015 billion of revenue, according to Thomson Reuters I/B/E/S data.

Goldman is one of the financial titans reporting earnings this week. The banking giant has continued to increase its profits even in tough times, so the others, particularly Bank of America, are better bellwethers for the market. Financials are projected for a 57 percent increase in earnings from the year-ago period, when Lehman Brothers imploded.

Banks are always important, Grigoli said, and investors will be looking for signs about loan losses and how fast they are escalating -- and whether profits from banks' traditional business are able to offset those losses.

The hope is that upside surprises for banks and the broader market will come from improvement in revenues and not just cost cutting, Citigroup's chief U.S. equity strategist Tobias Levkovich said in a recent note.


Another key driver for the stock market this week, as in recent ones, will be the U.S. dollar. Its weakness (both perceived and real) boosted the prices of materials, leading in turn to a jump in commodity-related stocks and sector indexes.

Key economic indicators are also on tap.

September retail sales are due on Wednesday, with an expectation for a 2.1 percent drop, according to economists polled in a Reuters survey. But data last Thursday showed same-store sales for September rose for the first time in more than a year, and the market could get an extra boost if retailers keep up the positive news.

Minutes from the Federal Open Market Committee's September meeting will be released on Wednesday at 2 p.m. (1800 GMT).

The overall Consumer Price Index for September, due on Thursday, is expected to show a 0.2 percent rise month over month and a yearly decline of 1.4 percent. Core CPI, which excludes volatile food and energy prices, is forecast to edge up 0.1 percent in September on a month-to-month basis and show a yearly gain of 1.4 percent.

Real earnings are expected to dip 0.1 percent for the month of September.

Initial claims for jobless insurance are expected at 525,000 on Thursday, roughly in line with last week's data, while continuing claims, at 6.02 million, are seen only marginally lower.

Industrial output and capacity utilization data for September are due on Friday morning, along with the preliminary reading for October on consumer sentiment from the Reuters/University of Michigan Surveys.

(Editing by Jan Paschal)