Le Deluge -- Earnings Season Kicks Off

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When Wall Street comes into the office on Monday, having sated itself with vernal bacchanalia over the weekend, the first thing it will do when it sits down at the trading desk is strap itself in. Earnings season is upon us.

Roughly a quarter of the companies in the

S&P 500

will be posting quarterly numbers in the week beginning April 13 (click

here and

here for an earnings calendar). Expectations are that they won't have much to crow about. Company analyst estimates are for earnings growth on the S&P to come in at a scant 0.5%.

This, however, may not be such a bad thing. It is widely believed that analysts have taken the

Norman Bates

thing with earnings a little too far. "The analysts are too bearish," says Peter Canelo, U.S. investment strategist with

Morgan Stanley

. "If you look at the trend of earnings revisions in the last three months, we haven't seen anything like this since the last recession."

That sets the market up for an upside surprise -- sort of. Open secrets aren't secrets, after all. This earnings season looks like it will be chock full of whisper numbers. There could be plenty of companies that beat estimates and then trade down. So while better-than-expected earnings normally translate into a good market, that's not so clear this time around -- especially since stocks have had such a run this year.

Still, Canelo thinks things look fairly good, despite the market's 14% hop this year. While in normal times investors could expect the market to lose a third of that kind of move, Canelo thinks that, because expectations are so easy to beat, the stocks may hold up and, if the bond market rallies, actually go higher -- something he's not interested in seeing happen.

"I'd prefer the market to take a break," says Canelo. "But you don't tell this market what to do."

Treasury traders, for their part, look like they'll have a pretty busy week as well. It's gotten to the point where either an Asian effect on the U.S. economy shows up in the economic data, or it doesn't.

"Finally, we're getting some information affecting the market," says Tony Crescenzi, chief bond strategist at

Miller Tabak Hirsch

. "Now the Asian impact should show up. If it doesn't, it means something. We have a different market now, one that's sensitive to economic data."

As luck would have it, there's a ton of economic data coming out.

Tuesday brings the March

retail sales

figures and

Consumer Price Index

.

Retail sales have some downside potential for the market. Expectations are for them to come in weak because Easter is so late this year -- no bonnet sales in March. "If it's strong, that would fly in the face of the strong Easter effect," says Crescenzi. "If it's in line or weak, people will dismiss the number and say, 'Oh, it's the late Easter. It doesn't matter.'"

On the CPI, traders will be watching the service sector, to see if wages are putting any pressure on there. If the core, up 0.3% in the February report, comes in strong again, that could create a little nervous selling.

The best reads on whether Asia is having much of an effect on the economy will come at the tail of the week. The April

Philadelphia Fed Survey

, released on Thursday, will give some indication of how much the Far Eastern crisis is biting into the manufacturing sector. February trade data, due Friday, will be closely watched. "If we see yet another increase for that, it would support the notion of an Asian impact that is accelerating," says Crescenzi.

Treasury traders will also be paying close attention to the dollar/yen rate. Thursday, the bonds fell under pressure on a quick drop in the dollar -- compliments of dollar selling by the

Bank of Japan

. The BoJ's action came at an opportune time -- European traders were heading home for the four-day Easter weekend, and their U.S. counterparts we're looking forward to a long weekend as well.

A rebound in dollar/yen isn't likely at the beginning of next week. U.S. and European officials have voiced support for the BoJ's move, and with the

G7

finance ministers and central bankers meeting in Washington on Wednesday, most investors will be forced to the sidelines for the beginning of the week.

"The key event is the G7 meeting," says David Gilmore, analyst at

Foreign Exchange Analytics

. "I think the market is going to be cautious about putting on any kind of major position on dollar/yen ahead of that. There's probably a 130 to 132

yen to the dollar range going into Wednesday."

After the meeting, the dollar could see a bounce, though, according to Gilmore. "G7 is not going to argue a joint intervention to support the yen, because Japanese fundamentals are so weak," he says.