NEW YORK ( TheStreet) -- Monday's nearly 3% surge in stocks, albeit on fairly low volume, has the Dow Jones Industrial Average back in positive territory for 2011, and suddenly the stage seems set for a strong finish to the year. We're still waiting for the follow-through, but evidently those with money to put to work are taking Germany and France at their word when they say they're committed to finding a solution to the sovereign debt situation across the pond. The banks took off on the news with Bank of America ( BAC), up 6.4%; and JPMorgan Chase ( JPM), gaining 5.2%; leading the blue chips higher, although all 30 Dow components closed in positive territory. If third-quarter earnings season is better than expected -- by no means a done deal -- and the economic data picks up a bit, as it sort of did last week, the major U.S. equity indices could claw back a healthy portion of their gains from earlier in the year. Scott Redler, chief strategic officer of T3Live, thinks stocks may have turned a corner, starting with the mid-session turnaround on Oct. 4, when the Dow closed up triple digits and ranged nearly 500 points. "I guess, ultimately, this bounce just FEELS different, based on the price action," Redler wrote. "The late 'fake-lower-and-rip' into the close Monday is reminiscent of the old bull market. Expect the market to break out of this range to the upside within the next two weeks." One stock that didn't participate was Netflix ( NFLX). Reed Hastings & Co. made news on Monday by backpedaling on plans to separate its physical DVD and streaming content services less than a month after announcing the change. While the stock initially rallied, running as high as $128.50, the shares did a Qwikster-like about face late in the session and closed down 4.8% at $111.62 after running to a new intraday 52-week low of $107.31. The summer of indecision has stretched into fall for Netflix as the company's management continues to baffle by repeatedly showing they haven't really thought out major changes before announcing them; subsequently apologizing (the 50% price hike, which remains in place) and now the flip-flop on Qwikster, which was widely panned when announced precisely because people would have to manage their accounts separately. Given the recent track record, this announcement has to be greeted with cynicism, and the question must be asked whether the move was driven by more than irate emails, meaning has Netflix seen another round of defections that may be significant enough to result in another lowering of subscriber growth expectations.
After all, the streaming business was where the weakness was in the earlier revision, which was driven by the much-lamented price hike. What's more likely, that Netflix simply reconsidered the separation because of complaints or that it saw droves of people dropping their accounts ahead of the Qwikster change, figuring why wait? BMO Capital kept a market perform rating on Netflix following the news, but it's telling that the firm, which says the stock looks cheap at current levels, isn't bullish enough to go on the record with an upgrade. "While we believe Netflix is attractively valued at current prices, we are updating our model to reflect the impact of some of the recent changes - in particular we expect to see some volatility with subscriber numbers, as well as some increased marketing to support the physical business," the firm said. "We expect the stock to remain volatile until we gain better visibility around its subscriber growth rates following both the price change and the decision to separate into two brands, and subsequently retreat from that strategy." Sterne Agee is neutral on Netflix and it lists three things that it believes Monday's announcement is signaling, none of them boding well for the stock. "Subscriber attrition/churn likely continued to meaningfully worsen following the company's mid-September pre-announcement that its 3Q ending subs would be 1 million lower than anticipated," the firm said, continuing: "At least in the near-term, it seems unlikely that there will be a sale of the company's DVD or Streaming services. It especially makes a sale to Amazon ( AMZN) unlikely," and finally "It makes it less likely Netflix will enter the video game rental business." Netflix is slated to report its third-quarter results on Oct. 24, and it'll be interesting to see where the consensus estimate is by that time. Right now, Wall Street is expecting earnings of 94 cents a share in the September-ended period on revenue of $811.4 million, but look for the sell side to lower its view in the next few weeks. Sterne Agee thinks the current fiscal 2012 view for a profit of $6.47 a share is too high, and its estimate of $5.78 a share reflects that.
The big piece of scheduled corporate news on Tuesday is the quarterly report of Alcoa ( AA), always the first Dow component to open its books. The stock is down more than 40% so far in 2011, and Wall Street isn't expecting much, given how far aluminum prices have fallen. The average estimate of analysts polled by Thomson Reuters is for a profit of 22 cents a share for the September-ended quarter on revenue of $6.24 billion. The bigger report this week for the broad market, though, is probably Thursday's morning headliner, JPMorgan, which will set the tone for the other big banks and be followed by Citigroup ( C) and Wells Fargo ( WFC) next Monday, and Bank of America next Tuesday. Tuesday's other big event is the release of the minutes of the most recent meeting of the Federal Open Market Committee on Sept. 20-21, which are bound to shake up trading when the headlines start to hit the wires at 2 p.m. ET. The inside dope on how the central bank members arrived at Operation Twist will be dragged into the light, and we'll here a bit more detail about the objections of the three dissenters -- Fisher, Plosser and Kocherlakota -- as well as get a clearer picture on Federal Reserve Chairman Ben Bernanke's view of the economy's health. In his recent congressional testimony, Bernanke said the recovery is faltering, and the market handled it in stride, but sometimes having the same sentiment spelled out in the FOMC minutes can be jarring for stocks. And finally, the Mortgage Bankers Association's application activity index for the week ended Oct. 8 is due at 7 a.m. ET; along with weekly reads on retail sales from ICSI-Goldman Sachs and Redbook. -- Written by Michael Baron in New York. >To contact the writer of this article, click here: Michael Baron. >To submit a news tip, send an email to: firstname.lastname@example.org