With the first-quarter earnings season coming to an end, investors will likely focus their attention on the Federal Reserve next week, which meets to determine the direction of interest rates.

After some dismal economic news in the past two days, including an increase in the unemployment rate and a big drop in manufacturing activity, some economists have said the Fed could switch to an easing bias on Tuesday, signaling that it is willing to reduce rates in the future. But few experts are looking for an actual rate cut.

"The jobs report, while weak, did not exhibit the kind of weakness that would prompt the Fed to feel a rate cut is urgent," said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co, and contributor to The Street.com's sister site RealMoney. "They may feel it's needed at some point, but would rather wait to see if the ending of war with Iraq is met by improved economic conditions."

Last time the Fed met, in March, it said it could not accurately assess the balance of risks because of the ongoing war. Crescenzi thinks the central bank could repeat that view on Tuesday, but he said it is possible it will move to an accommodative stance, or even shift to neutral.

Despite the recent data, Crescenzi believes there are some reasons to be optimistic about the economic recovery. He noted that mortgage refinancing continues to be strong and that oil prices have fallen sharply, and that both factors will put more money into consumers' pockets. He also believes chain-store sales have stabilized and that construction spending is falling at a much slower pace.

SEI Investments chief economist Nancy Kimelman is somewhat more skeptical, however, noting that while oil prices have fallen off their war-related highs, they're still acting as a drag on the economy.

The odds of another rate cut by the Fed actually fell Friday to around 20% from a high of about 30% on Thursday. Back in March, a 25-basis-point rate cut was fully priced in.

"We believe that Chairman Greenspan had the gist of the numbers when he testified on Wednesday," said UBS Warburg's chief economist Maury Harris. "At that time, in our view, he hinted that policy would remain on hold at next week's FOMC meeting."

Harris believes the Fed will conclude that the risks are currently balanced between growth and price stability. "Of course, if activity does not revive by the next FOMC meeting in late June, another ease would likely be in order," he said.

Although the majority of S&P 500 firms have now reported earnings, there are about 30 companies due to release results next week, and at least one report could generate some excitement. On Tuesday, Cisco Systems ( CSCO) is slated to post fiscal third-quarter earnings. Analysts expect the company to report a profit of 14 cents a share, compared to 11 cents in the same period a year ago. Gillette ( G), Comcast ( CMCSK) and MetLife ( MET) are also expected to release results.

Results for the first quarter have been very encouraging for the most part, having beaten expectations by 6.6%, according to Joe Cooper, a research analyst at Thomson First Call. Earnings are now expected to be up 13.1% for the quarter, or 6.3% excluding energy. That's much better than the 8.4% growth, or 1.8% excluding energy, that analysts were calling for at the start of April.

Cooper also noted that revenue growth has climbed 9% in the first quarter, showing that "it's not all a cost-cutting story." Indeed, the falling dollar has helped out, easing currency translations. Although expectations for the second quarter have come down slightly to 6.2% from 6.8% at the beginning of April, third- and fourth-quarter growth estimates have remained intact.

The Dow and S&P have continued to bound higher for the past few weeks and ended at three-and-a-half-month highs Friday. Meanwhile, the Nasdaq is sitting at its highest level since June 18 of last year, which some analysts said is a positive technical sign. The Dow rose 128 points Friday to 8582, while the S&P was up almost 14 points to 930. The Nasdaq gained 30 points to 1502. Still, some analysts say stocks are beginning to look tired.

"The market has reached an extreme overbought condition," noted Don Hays, president of Hays Advisory. This typically presages "a temporary pause-to-refresh to allow the overbought condition to abate."

In terms of economic data, next week will be somewhat lacking. The Institute for Supply Management will release data regarding services activity for April. Wholesale inventories and consumer credit is due for release on Wednesday, and initial claims and the FOMC minutes of the Fed's March 18 meeting will be released on Friday.