Though 2005 started badly, stock investors can take heart that the market began February with much of last year's gains intact. Now the major indices have strung together two good weeks, and they're facing some critical resistance going into the third.

Confidence in the outcome of the U.S.-led occupation of Iraq got a much-needed boost from the apparent success of the elections in that war-torn country last weekend. With a decent earnings season under way, the markets look poised to take another run higher, but analysts are waiting for trading volume to confirm the rally.

"We've seen enough strength starting in late January to break the short-term downtrend, and start a rebuilding process," said Phillip Roth, chief technical market analyst with Miller Tabak & Co. "The major averages are right up against a resistance zone. We're at a spot where we need some volume right away to punch through, and we well might get it."

For January, the

S&P 500

lost 2.5%, the

Dow Jones Industrial Average

shed 2.7%, and the tech-heavy

Nasdaq Composite

tumbled about 5.2%. The losses came after 2004 ended with a two-month rally, starting with the re-election of President Bush, that gave the market all its gains for last year. Things have stabilized since, and in their second straight week of gains, the S&P added 3% this past week, the Dow gained 3%, and the Nasdaq was up 2.5%.

As it looks to muster another stretch upward, the S&P now sits right above its previous peak from Jan. 18 at 1196. If it can continue on its way, the index could find smooth sailing back to the 1210 to 1220 area, where it ended 2004. If it stumbles, some consolidation likely would be in store for next week.

"On the downside, the key area for the intermediate term on the S&P is down at 1160, which is almost where we got to a couple of weeks ago," said Mark Arbeter, chief technical analyst with Standard & Poors. "That's the top of the consolidation from back in 2004. As long as that area holds, the market's going to be in good shape. And the intermediate-term trend is still bullish here."

While Arbeter has a positive outlook, he is troubled by trading volume.

"The volume just hasn't been real robust yet, and that worries me a little bit here," he said. "I'd like to see much better-than-average volume, while the volumes we've seen lately have been about average."

As for major catalysts, next week's lineup for events on Wall Street is thin. The fourth-quarter earnings season heads into its tail end, and while the odd release could move stocks, the verdict for the quarter is in. Earnings growth is slowing, but companies are nailing estimates.

Thomson First Call reported Friday afternoon that 363 companies listed on the S&P 500 had reported to date. About 65% of those beat analysts' expectations, 16% hit targets and 19% came up short. The overall growth rate improved last week to 19.8% from the previous estimate of 18%. That result was better than expected, but still marks a decline from the fourth quarter of 2003, when overall earnings grew 28.3%.

In the first quarter of 2005, analysts foresee earnings growth deteriorating further to a gain of 6.9%, down from the 27.3% logged in the same quarter last year.

Meanwhile, many skeptics are pointing to the disproportionate role that the red-hot energy sector is playing in the overall data. With oil futures hovering around $46 a barrel, earnings growth in the sector jumped to 100% after

Exxon Mobil

(XOM) - Get Report

barreled past Wall Street's expectations with quarterly operating profits of $8.42 billion -- up 90% from a year ago and the highest ever in the history of the company.

"They were a huge impact on the index," said Thomson First Call analyst John Butters. "They blew out the number and greatly added to the growth rate. There were other good reports last week, but that's the one that really stands out."

The prevailing wind in next week's market will be a steady stream of earnings releases from a variety of industries, culminating with reports on Thursday from





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Thursday also will be a big day for economic news, thanks in part to recent remarks from Alan Greenspan about the U.S. trade and federal spending deficits. The

Federal Reserve

chairman boosted spirits after a weaker-than-expected employment report when he said that fiscal restraint would finally come into fashion on Capitol Hill this year, and that the weaker dollar could actually help narrow the nation's trade gap.

"The voice of fiscal restraint, barely audible a year ago, has a least partially regained volume," Greenspan said. "Besides market pressures, which appear poised to stabilize and over the longer run possibly to decrease the U.S. current account deficit and its attendant financing requirements, some forces in the domestic U.S. economy seem about to head in the same direction."

The government is expected to report Thursday morning that the trade gap narrowed in December to $57.4 billion, after hitting a record $60.3 billion in November. Meanwhile, the Treasury Department is expected to say the federal budget ran a surplus of $5.1 billion in January, after being in the red by $1.4 billion in December.

In other economic news due out next week, the Fed is expected to say Monday that consumer credit increased to $7.9 billion in December, thanks to strong auto sales and holiday purchases made with credit cards. In November, consumer credit fell by $8.7 billion. On Wednesday, the government is expected to say wholesale inventories rose 0.9% in November, down from the 1.1% growth recorded in October.

On Thursday, the Labor Department will release initial jobless claims figures for the week ended Feb. 5; this is expected to total 329,000, up from 316,000 the previous week.

"I don't think it'll be any economic news that will affect the market next week," said Al Goldman, chief market strategist with A.G. Edwards. "What may affect it is that we've had a pretty good short-term rally. My guess is we're going to get a couple days of moderate pullback next week, and I will look at that as a buying opportunity."

In the long term, Goldman said he thinks we're still in a bull market that, at 28 months old, is starting lose the spring in its step.

"This market doesn't need a resuscitator yet, but it can't rock and roll anymore like it could back in 2003," he said.