With only a few big names left on the first-quarter earnings calendar, economic data will move to the center of Wall Street's collective consciousness in the coming week. That could be a problem for bulls, who have been successfully relying on outsize corporate earnings to medicate the markets' recent bout of rate-hike fever. "When it comes to next week's economic data, the question is whether we can overcome strong numbers," said Paul Mendelsohn, market strategist at Windham Financial. "If the numbers show too much strength and the 10-year Treasury
yield breaks through 4.50%, that will put a lid on the market." Stellar profit reports had the upper hand in the five sessions ended Friday, with stocks finishing the week higher despite the violent swoon that greeted Fed Chairman Alan Greenspan's testimony Tuesday. The Dow Jones Industrial Average gained 20 points to 10,472 on the week, while the Nasdaq -- which had fallen for four weeks in a row -- added 53 points to finish at 2049. Even with that performance, it will be hard to find a trader heading into Monday who isn't acutely aware of the market's susceptibility to economic data that build a case for tightening. Paranoia has been the name of the game since Greenspan sounded deflation's death knell in testimony before the Senate Banking Committee last week. "The Fed is not helping by creating so much uncertainty as to when they will move and by how much," noted Mendelsohn. Until last week, the market had been steadily digesting economic readings that depicted an economy slowly reviving. A far-bigger concern was world violence. But in the context of blowout earnings from the likes of Caterpillar ( CAT), American Express ( AXP) and Motorola ( MOT), the focus moved back home, and the tone shifted from caution to fear. "Excessively good news like Friday's 3.4% rise in durable goods number will scare the Fed into moving before August, and that would spook the equity market," said Robert Pavlik, portfolio manager at Oaktree Asset Management. That report was one of several, including Thursday's producer price index and first-time jobless benefits, that combined with Greenspan to throw the bond market into fits and kept stock traders on edge heading into the weekend.
"Alan Greenspan has already stolen the spotlight from companies reporting their quarters," said Bryan Piskorowski, a market analyst at Wachovia Securities. Traders will be closely monitoring the market's reaction to Thursday's gross domestic product report for the first quarter, which economists are forecasting to be up 5%. The Chicago purchasing managers index will be in focus on Friday. Economists are forecasting a level of 60.3 for the PMI. Rest assured that Fed members also will be keeping an eye on the data before their May 4 meeting -- when they aren't speaking themselves. Michael Moscow, president of the Federal Reserve Bank of Chicago and a member of the Federal Open Market Committee, speaks on April 26 in San Francisco. Fed Chairman Alan Greenspan will be speaking at an energy conference in Washington on April 27. And Robert Parry, the soon-to-be-retiring head of the Federal Reserve Bank of San Francisco, is scheduled to speak on April 30. Russ Koesterich, a market strategist at State Street, however, does not see next week's economic data playing too much into the Fed's decision, saying that the GDP is a backward-looking number that has been fairly well forecast. Instead, he is waiting for the April employment report due for release on May 7. "What matters is jobs," says Koesterich. "Until the Fed sees sustained evidence that the labor market has stabilized, they won't do anything." As for earnings, the spigot will be far from shut off this week. Tuesday is a huge day for defense stocks, with Lockheed Martin ( LMT) and Rockwell Collins ( COL) taking center stage. Consumer cyclical giants Gillette ( G) and Procter & Gamble ( PG) will be reporting Thursday and Friday, respectively. Other companies reporting are EDS ( EDS) Monday; Verizon ( VZ) Tuesday; McDonald's ( MCD), Comcast ( CMCSA) and JDS Uniphase ( JDSU) Wednesday; and Exxon ( XOM) Thursday.