The Coming Week: Earnings Flood Continues

Some 166 companies in the S&P 500 will report results this week, eight Dow components among them.
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Stocks moved higher last week, as investors cheered some better-than-expected earnings, but whether the gains will continue in the week ahead depends on another raft of corporate results.

Some 166

S&P 500

companies are due to report first-quarter earnings next week, with eight

Dow

components among them. So far, about a third of the index has released numbers, and the results have been coming in ahead of projections. In fact, earnings are now expected to be up 10.2% in the first quarter compared with last year. Just last week, analysts were calling for 8.3% growth, but large upside surprises from the likes of

Ford

(F) - Get Report

,

J.P. Morgan

(JPM) - Get Report

and

Microsoft

(MSFT) - Get Report

have helped to boost that number. Excluding energy, earnings are slated to rise 3.7%, compared with an estimate of 1.6% last week.

"In terms of companies beating, matching and missing expectations, it's basically in line with history," said Joe Cooper, an analyst at First Call. "The only deviation is that fewer companies are missing and more are matching."

Cooper also noted that expectations for the second quarter haven't changed materially despite concerns that companies would begin to lower their estimates. The growth rate for the second quarter remains roughly the same at 6.4%, or 4.6% excluding energy.

Frank Curzio, market strategist and money manager at FXC Investors, noted, "Looking into next week, I believe the earnings picture looks good, and the market could start turning bullish. Investors have been reacting well to earnings, and it's good to focus more on the economic picture, now that the war is over."

The Dow Jones Industrial Average rose 1.6% last week, while the

Nasdaq

was up almost 5%. The S&P 500 climbed almost 3%.

James Park, senior vice president at Brean Murray & Co., believes the market is getting "a little overbought" at this point, and said he wouldn't be surprised to see some profit-taking. Analysts have expressed concern recently about the high level of complacency in the market, as measured by various volatility indicators. The CBOE Volatility index fell to 24.66 Thursday from 28.27 last Friday.

"We now feel that fear is being replaced by mass complacency," said David Skarica, editor of the newsletter

AddictedToProfits

.

Skarica said the VIX is not yet in the zone where the market normally tops out -- that lies in the 20 to 22 area. However, he said, the CBOE Nasdaq volatility index and Nasdaq 100 volatility index are showing extreme levels of complacency, with the QQV hitting an all-time low this week and the VXN reaching its lowest level since the fourth quarter of 1999. "It is difficult for the market to go up a great deal on extreme complacency," he said.

Still, Park of Brean Murray noted that the market is "earnings-driven" and that if results prove to be respectable next week, stocks could continue to move higher regardless of these technical issues.

"This is the breather that everyone's been looking for coming out of the war," he said. "But it's not so hard to meet lowered expectations, and there've been a lot of shorts in this market, which has exacerbated any strength we've seen."

On Monday,

3M

(MMM) - Get Report

and

Merck

(MRK) - Get Report

will release results, followed by

AT&T

(T) - Get Report

,

Eastman Kodak

(EK)

and

Boeing

(BA) - Get Report

on Wednesday.

Thursday will bring results from

American Express

(AXP) - Get Report

,

International Paper

(IP) - Get Report

and

SBC Communications

(SBC)

.

Also on the earnings docket are

Sprint

(FON)

on Monday,

eBay

(EBAY) - Get Report

and

Pfizer

(PFE) - Get Report

on Tuesday,

AOL Time Warner

(AOL)

and

LSI Logic

(LSI) - Get Report

on Wednesday.

Amazon

(AMZN) - Get Report

and

Nortel

(NT)

report results on Thursday, and

R.J. Reynolds

(RJR)

does so on Friday.

Meanwhile, several key economic reports are slated for release. On Monday, the leading economic indicators report, a proxy for the economy over the next six months, will be released. Economists are looking for a 0.1% decline in March after a 0.4% drop in February. On Wednesday the

Federal Reserve

will release its Beige Book -- a snapshot of the economic conditions in various regions across the country. Thursday will bring the durable goods orders for March. Analysts expect a 1% decline after a 1.6% drop in February.

On Friday, investors will get a look at an advance reading on first-quarter GDP. Economists predict that the economy grew 1.9% in the first three months of the year. The Michigan Consumer sentiment survey will also be released Friday, along with existing- and new-home sales.

-- Paula Lace contributed to this story.