Earnings season kicks off next week with Alcoa's ( AA) report on Tuesday, and investors will be watching company forecasts and management comments for glimmers of hope that an economic recovery has begun to take shape.

Analysts expect the aluminum producer and Dow Jones Industrial Average component to report a first-quarter loss of 52 cents per share due to slumping demand for automotive components, building materials, soda cans, aluminum foil and other products derived from the metal. However, signs of life in economic data outside of employment recently -- home sales, consumer spending, factory orders and construction -- have started to turn sentiment around and pushed the Dow above 8000 this week.

Weak results, earnings revisions and huge losses at major financial institutions like American International Group ( AIG), Citigroup ( C), Bank of America's ( BAC) newly acquired Merrill Lynch and the mortgage-finance giants Fannie Mae ( FNM) and Freddie Mac ( FRE) surprised investors last year. However, analysts at Deutsche Bank Private Wealth Management say weak earnings may bottom out by the third quarter.

"If history proves a reliable guide, the bulk of the P/E contraction is behind us," writes Chief Investment Strategist Larry Adam.

Investors will be monitoring reports from Alcoa and other major firms to hear what they're seeing in different segments of the economy. Fertilizer producer Mosaic ( MOS) reports on Tuesday, discounter Family Dollar ( FDO) on Wednesday and integrated oil company Chevron ( CVX) on Thursday.

"We won't be watching the actual numbers coming out but the outlook for ahead," says David James, of James Investment Research and co-portfolio manager of the James Advantage funds. "The other key number we'll be keeping a look out for is shares outstanding. If management thinks the stock is undervalued, they'll be buying it."

James adds that the consumer credit figures to be released on Monday will determine whether unexpected increases in January and February have been sustained. If the credit extended to consumers through banks continues to have upward momentum or remains strong, it will be a positive sign for the economic outlook, he says.

Other reports to look out for next week will be the weekly initial jobless claims and trade data, both of which will be released on Thursday. While employment data are a lagging indicator of economic activity, they receive particular attention as the job market has deteriorated further. Friday's jobless report for March showed that the economy has already lost more than 5 million jobs since the start of the recession, pushing the jobless rate up to 8.5%, the highest level in a quarter century.

Another factor that could impact the market next week is activity in Washington, D.C., where weeks of public outcry have led to extensive government intervention into corporate America. However, as the past few weeks have shown, it's incredibly difficult to predict what results the ongoing political drama will have.

On one hand, the tough measure passed through the House of Representatives to tax bonuses paid out at AIG sent tremors through Wall Street's capitalist core. New York Attorney General Andrew Cuomo's string of subpoenas to financial firms and General Motors' ( GM) ouster of Chairman and CEO Rick Wagoner, which was forced by the Obama administration, also showed that those receiving government assistance are under close scrutiny.

But on the other hand, there are glimmers of life in the stock and debt markets due to the Federal Reserve's huge role in buying debt and financing its purchase through the Public-Private Investment Program.

An earlier program called the Term Securities Lending Facility, which lent Treasury bonds to primary dealers in exchange for less-liquid securities, this week received no bids -- the first time that has happened since its implementation. The lack of interest is a potential sign that the private market had been healthy enough to not require TSLF assistance. Additionally, the first stimulus dollars started to be distributed on April 1, and their effects are sure to be felt in the coming months.

Matthew Lloyd, chief investment strategist for Advisors Asset Management, notes that being under Uncle Sam's wing has led financial institutions to make an extensive effort to pay back Treasury loans as quickly as possible. Some small banks have already done so, and larger ones like BofA and Wells Fargo ( WFC) have indicated plans to do so as soon as prudently possible.

"The sooner that those who have put off substantive and painful measures to their business models, the sooner the fundamental recovery can take place," says Lloyd. He adds that "as much as this may seem all-encompassing, there are pockets of value that we still think" warrant investors' dollars.

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