With stocks near two-month lows, investors hope the start of second-quarter earnings season and an onslaught of economic news can revive the major indices in the coming week. Given the market's recent habit of punishing the underperformers with more vigor than it rewards the standouts, it might take a lot to get the job done.

About a dozen big tech companies, including

Siebel

(SEBL)

,

PeopleSoft

(PSFT)

and

BMC Software

(BMC)

, recently have said second-quarter profits would fall short of analysts' expectations. The warnings turned a lot of stomachs and left the

Nasdaq

down 3% on the week, while the

Dow

fell 0.7% and the

S&P 500

lost 1.2%.

Not all the news was bad. Notwithstanding its Thursday selloff,

Yahoo!

(YHOO)

managed to double its second-quarter earnings, while

General Electric

(GE) - Get Report

and

SAP

(SAP) - Get Report

surprised to the upside. GE CEO Jeff Immelt said the economy is the best it's been in years.

"You've gotten a flavor so far with Yahoo! and GE, and you'll get more next week," said Paul Nolte, director of investments at Hinsdale Associates. He cited high hopes for

Intel

(INTC) - Get Report

and

Juniper

(JNPR) - Get Report

, both of which report Tuesday.

Overall, the second-quarter earnings season has potential to make or break the major stock indices' trend for the rest of the year, Nolte thinks. He is concerned, because "we've wiped out all the gains that we slowly built up for the first six months of the year."

Indeed, the Dow Jones Industrial Average is down about 3.3% from early January, while the Nasdaq has lost about 3% and the S&P 500 is flat. The performance is particularly disconcerting to market watchers who had expected a recent flurry of watershed events -- namely the

Fed's

first tightening and the handover of power in Iraq -- to spark some action.

David Rosenberg, chief North American economist at Merrill Lynch, says interest rates remain the key to equity market performance. "What other catalyst could there possibly be?" Rosenberg recently wrote. "The Iraq handover came and went without much fanfare -- this was supposed to be an inflection point." The S&P is down about 2% from June 28.

"In the past two decades, bond yields and the market multiple moved inversely more than 80% of the time," said Rosenberg. "So does the Fed go more or less than what is currently priced? That is the question." He expects the short-term rate to peak at 2.5% to 3% in the next 12 to 18 months.

Rosenberg added that second-quarter earnings could boost market performance, but he believes the quarter's results were priced in long ago. Along with a contraction in forward price-to-earnings multiples and a previously forecast slowing of profit growth, upward stock price momentum is far from guaranteed.

Aside from earnings news, the deluge of economic reports next week will help "confirm or deny the rumor that the economy is slowing," said Nolte. Inflation- and consumer-related data will give some clues as to whether last Friday's weaker-than-expected employment report was a true indicator of a slowdown in economic growth.

The disappointing employment numbers and subsequent negative reaction from the market, however, reflect expectations that the numbers should have been higher. A slowdown in economic growth does not mean the economy is going to lose all the momentum it has built up in the last six months.

The economy's "not bad, in and of itself," Nolte said. "But because the expectations are for much more robust growth, if that does not materialize, we could be seeing lower

stock market prices."

The top economic reports of the week will be the producer price index and industrial production/capacity utilization reports on Thursday and the consumer price index and the preliminary reading of consumer sentiment from the University of Michigan on Friday.

Incidentally, the sentencing of Martha Stewart, founder of

Martha Stewart Living

(MSO)

, also will take place on Friday. Stewart was convicted in March of lying to federal prosecutors about her sale of

ImClone Systems

(IMCL)

shares in December 2001.

Other notable earnings reports next week are

Novellus

(NVLS)

on Monday;

Johnson & Johnson

(JNJ) - Get Report

on Tuesday;

Apple Computer

(AAPL) - Get Report

and

Genzyme

(GENZ)

on Wednesday; and

Nokia

(NOK) - Get Report

,

Citigroup

(C) - Get Report

and

Southwest Airlines

(LUV) - Get Report

on Thursday.