A struggling stock market faces more volatility in the coming week as the fourth-quarter earnings season reaches a crescendo and investors look beyond next Friday to elections in Iraq and another Federal Reserve meeting.

So far, the first leg of 2005 has been a flameout for stocks, after the two-month rally that closed out 2004. For the first time since 1977, the equity markets have lost ground for the first three weeks of January, leaving the Dow Jones Industrial Average and the S&P 500 down 3.6% for the year and the Nasdaq Composite down 6.5%.

"I would think that we're going to get at least one good week here in January," said Paul Nolte, director of investments with Hinsdale Associates. "People are focused on earnings, and what we're seeing from earnings is generally good, but the commentary going forward for a lot of companies is not terrific. I think that's keeping investors' enthusiasm under wraps."

While questions abound for 2005, results for the final quarter of 2004 are off to a good start this reporting season, albeit with the majority still to be tallied. On Friday, Thomson First Call reported that 115 companies from the S&P 500 were on the books, with 65% beating Wall Street's estimates, 18% matching them and 17% falling short. Those results provide some upside to a typical reporting season, when roughly 59% beat estimates, 21% match and 17% miss.

Headed into the peak week of earnings season, with 150 companies set to report, results are headed for year-over-year growth of 16.5%, beating estimates at the beginning of the season that predicted 15.5% growth.

"We're running a little more positive than the average, but less than a quarter of the index has reported so far, so we still have quite a ways to go on that," said John Butters, a research analyst with Thomson First Call.

The strongest sectors reporting so far are energy, with 73% year-over-year growth, and materials, up 72%. At the low end, utilities are up just 2% while telecom gained 4%. The diversity between sectors, something that also is playing out in stock market action, is another concern for investors.

Hugh Johnson, chief investment officer with First Albany, noted that even in a down market, utilities have done well, as well as health care and consumer staples.

"I'm always bothered when I see those sectors do well, because those are the sectors that do well in the late stages of a bull market or in a bear market," Johnson said. "That's not a good sign, particularly when you see the stock market going down at the same time, and you also see large-caps outperforming small."

Next week brings a variety of notable companies reporting results, starting on Monday with a raft of technology names like Silicon Technologies ( SLAB) and NetFlix ( NFLX).

On Tuesday, DuPont ( DD) is expected to say it earned 33 cents a share, up from 29 cents a share the year before; and Merrill Lynch ( MER) is expected to report earnings of $1.10 a share, down from $1.42.

Coach will provide a snapshot of the luxury retailing market, which is said to be especially strong over the holiday season.

Consumer staples will be in the spotlight Wednesday, when Altria ( MO) is expected to report flat results at $1.06 a share for the quarter.

On Thursday we'll hear from companies such as Caterpillar ( CAT), Lockheed Martin ( LMT), Nokia ( NOK) and JetBlue ( JBLU).

Then Friday will wrap up the week with the likes of ChevronTexaco ( CVX), Halliburton ( HAL), McDonald's ( MCD) and Procter & Gamble ( PG).

In macroeconomics, fears of a consumer slowdown are back like a bad penny, even after the holiday selling season was saved in the final weeks of December.

The Conference Board is expected to report Tuesday morning that its consumer confidence index fell to 101.5 in January from the 102.3 logged in December. That follows Friday's news that the University of Michigan's consumer sentiment index dropped unexpectedly to 95.8 in a preliminary reading on January, from December's 97.1.

"We're trying to figure out where consumers are going to get the wherewithal to continue to spend at the rate they've been spending, so we see a slowdown there," Nolte said, citing increased levels of debt and rising interest rates.

Wednesday's oil inventory report could make waves in light of the stark reversal in weather patterns that have turned a seemingly mild winter into a storm-ridden freeze fest.

The government will release a report on durable-goods orders in December on Thursday morning; growth is expected to slow to an increase of 0.6% from the 1.6% jump recorded in January. Then on Friday, the advance report on GDP growth in the fourth quarter is due out from the Commerce Department; it's expected to show the economy expanding at a rate of 3.5%, down from the third quarter's 4% jump.

The potential for violence in the Middle East looms, with elections in Iraq scheduled for Jan. 30. Insurgent attacks have not abated in the region, and most observers agree that the elections mark a crucial juncture for the success of the American-led occupation there. The results could have major ramifications for the U.S. economy, and in turn, the financial markets.

Furthermore, with the Federal Open Market Committee scheduled to meet on the first two days of February, the future of interest rates remains a hot-button topic on Wall Street. Fed funds futures have priced in yet another quarter-point hike in the central bank's overnight lending rate, signaling that the risk of inflation is still a concern.

"Inflation is the biggest risk to the markets now," said Johnson.