Coming Week: Opening Day for Earnings

Earnings season kicks off next week with Alcoa's (AA) report on Tuesday, and investors will be watching company forecasts and management comments for glimmers of hope that an economic recovery has begun to take shape.

Analysts expect the aluminum producer and Dow Jones Industrial Average component to report a first-quarter loss of 52 cents per share due to slumping demand for automotive components, building materials, soda cans, aluminum foil and other products derived from the metal. However, signs of life in economic data outside of employment recently -- home sales, consumer spending, factory orders and construction -- have started to turn sentiment around and pushed the Dow above 8000 this week.

Weak results, earnings revisions and huge losses at major financial institutions like American International Group (AIG), Citigroup (C), Bank of America's (BAC) newly acquired Merrill Lynch and the mortgage-finance giants Fannie Mae (FNM) and Freddie Mac (FRE) surprised investors last year. However, analysts at Deutsche Bank Private Wealth Management say weak earnings may bottom out by the third quarter.

"If history proves a reliable guide, the bulk of the P/E contraction is behind us," writes Chief Investment Strategist Larry Adam.

Investors will be monitoring reports from Alcoa and other major firms to hear what they're seeing in different segments of the economy. Fertilizer producer Mosaic (MOS) reports on Tuesday, discounter Family Dollar (FDO) on Wednesday and integrated oil company Chevron (CVX) on Thursday.

"We won't be watching the actual numbers coming out but the outlook for ahead," says David James, of James Investment Research and co-portfolio manager of the James Advantage funds. "The other key number we'll be keeping a look out for is shares outstanding. If management thinks the stock is undervalued, they'll be buying it."