The Coming Week: Earnings and Data Fill Market's Plate - TheStreet

Sure, there is the unstable price of oil. Then there's a lame euro and signs of growing inflation at home. But what could really dictate where the market is headed this week -- and whether it can build on Friday's stupendous rally -- are earnings reports from some vital companies.

Among the bellwethers reporting this week are

IBM

(IBM) - Get Report

,

Microsoft

(MSFT) - Get Report

,

Citigroup

(C) - Get Report

and

Chase Manhattan

(CMB)

.

After six weeks of severe mistreatment, investors fell back in love with stocks on Friday. Following a few strong earnings reports, including one from PC maker

Gateway

(GTW)

and a couple of bullish analyst reports on current stock valuations, the

Nasdaq Composite Index rang up the second-largest percentage gain and third-largest point gain in its history. It also managed to close back above its previous low for the year of 3164.5.

The

Dow Jones Industrial Average didn't break any records Friday. But it, too, managed to tack on a triple-digit gain by the end of the day, carried by gains in the technology components and the cyclical names.

The question now is whether investors decide to trust this Paul Bunyan-sized bounce and put an end to their misery. Many Wall Streeters are still reeling from the recent selloff, and whether they have the guts or the stamina to get back in could be determined next week.

Caution!

"Next week is going to be a key week. There was a lot of hurt and pain this week. People don't forget these things. We're getting near the end of the year. Investors want to see profits. It shook some people out of here. So I'd say caution, caution, caution," said Michael Lyons, vice president of investment banking at

Morgan Stanley Dean Witter

.

While

Goldman Sachs'

Abby Joseph Cohen and

PaineWebber's

Ed Kerschner said Friday morning that current conditions represented a good long-term buying opportunity, some analysts aren't quite sure that the indices have reached their lows yet. Many felt that, following a week of treacherous selling, the indices were due for a technical bounce -- not necessarily a sustainable one.

Certainly, the market has got a lot on its plate.

The factors that got investors selling in the first place haven't gone away. While oil prices have come off of their highs, they remain vulnerable to tensions in the Middle East and an oil workers strike in Venezuela, the euro continues to falter and Friday's stronger-than-expected core

Producer Price Index

doesn't bode well for inflation.

The Economy Matters

The problem is, no one is sure how far or how fast the economy is actually slowing. Particularly now that rising oil prices and a strong dollar have been thrown into the mix.

"Middle East turmoil and rising oil prices are threatening the outlook for continued strong, noninflationary economic growth," said

Salomon Smith Barney's

weekly report on the economy.

"The slide in equity prices, along with rising credit spreads and a persistently strong dollar, suggest that financial conditions are tightening at a time when growth has already moderated."

Investors will want to keep a close eye on next week's

Consumer Price Index

, released on Wednesday. An energy-led jump in retail commodity costs may fuel the largest rise in the CPI in three months.

Because data have been showing an economic slowdown since early summer, many market players are hoping that the

Fed's next move is an interest-rate cut. Any sign to the contrary could send buyers scuttling back to the sidelines.

"Futures and forwards have priced in an interest-rate cut this winter ... but Fed officials would have to be convinced that higher energy costs are not translating into higher inflation expectations that could infect wage and price decisions across the economy," said Solly's report.

Earnings Go-Go

But the market's direction will probably hang most heavily on

this week's earnings reports. Indeed, investors practically ignored the hot PPI number and violence in the Middle East on Friday.

"This market cares about bottom-up earnings news -- what tech-company earnings look like in the next three months," said Robert Barbera, chief economist at

Hoenig & Co.

"When you talk about energy prices, when you talk about the currency, those are variables that potentially can affect earnings, but during the earnings report season, you care about the earnings reports. It's not going to matter too much even if numbers do come out hot," he added.

The reporting list includes heavy-hitting tech and financial stocks such as

IBM

(IBM) - Get Report

,

Intel

(INTC) - Get Report

,

Microsoft

(MSFT) - Get Report

,

Apple

(AAPL) - Get Report

,

Citigroup

(C) - Get Report

and

Chase Manhattan

(CMB)

.

Intel and Apple have already warned that they will miss their earnings estimates this quarter, so any weakness in those reports probably won't make waves.

But IBM, which reports on Tuesday, could shake things up a bit. Big Blue has been the subject of rumors that it would warn because the company's stock often mirrors the Nasdaq's performance.

Pundits were mixed on what earnings season would bring.

"I don't want to be around if they report badly. But, honestly, I think the bad news is behind us. It's not the end of the world. Stocks are still here. If you liked them early in the year, you've got to like them here," said Morgan Stanley's Lyons.

But William Rhodes, chief investment strategist at

Williams Capital

, believes even good earnings don't help a market that has decided to move lower.

"What disturbs me is the P/E ratio has fallen for the

S&P 500. The point of that is that people are just not willing to pay as much for earnings, so it's harder to get a higher stock price, even if you get good earnings growth," said Rhodes.

This'll be the week to tell.