US stock investors will watch the earnings numbers flow next week to see how much momentum the rally can get from early profit reports.
The first-quarter figures come as the three major US stock indexes finished a sixth straight week of gains, the best string since the rebound from 12 and half-year lows in March 2009, and the Dow briefly popped above 11,000 late on Friday.
Those gains could make it tough for stocks to rally further, even with expectations, according to Thomson Reuters, for Standard & Poor's 500 companies' first-quarter earnings to rise 36.8 per cent from a year ago.
The earnings period kicks off with results from Dow component Alcoa after the bell tomorrow.
Besides Alcoa, results are expected next week from top tech companies Intel and Google, as well as from General Electric and JPMorgan Chase.
"The reaction to some of these earnings is going to be really important. If you don't get the setback, and it trades higher, I think you're going to squeeze another wave of buyers into the market," said Nick Kalivas, Vice-President of financial research senior equity index analyst, at MF Global in Chicago.
While earnings are expected to be the focus, next week also brings the Consumer Price Index, March retail sales, industrial production, housing starts and consumer sentiment reports, which will help investors gauge the speed of the economic recovery. Other events likely to spark attention next week: Federal Reserve Chairman Ben Bernanke testifies on the economic outlook before the Joint Economic Committee, while investors will watch for signs of change in Greece's debt crisis.
On Friday, the Fitch credit rating agency downgraded Greek sovereign debt two notches to BBB-, leaving Greece's debt just one grade above junk status.
For the week, the Dow Jones industrial average rose 0.6 per cent, the S&P 500 gained 1.4 per cent and the Nasdaq increased 2.1 per cent. "The stock market has had a very significant rise off the (February) lows," said Michael Sheldon,chief market strategist at RDM Financial in Westport, Connecticut.
"I wouldn't be surprised to see some near-term pullback within the context of a rising stock market," he said.
Much stronger-than-expected earnings have helped propel the S&P 500 up more than 75 per cent from the March 9, 2009, closing lows. But in the last earnings season, stocks actually lost about three per cent as investors sold equities despite strong results.
Some 72 per cent of companies beat earnings estimates in the fourth quarter, down from a record 79 per cent in the previous quarter, but still well above the 61 per cent in a typical quarter, Thomson Reuters data showed.
Technical indicators point to overbought conditions heading into next week's earnings, which could mean a pullback is in store, some analysts said.
"Short-term momentum for the Dow has been deteriorating since March 23 after reaching an overbought condition," said Chris Burba, short-term market technician at Standard & Poor's.
The Dow briefly rose just above 11,000 moments before Friday''s closing bell, but ended at 10,997.35, while the S&P 500 neared the 1,200 mark. Both levels represent technical resistance, Burba said.
Bernanke is scheduled to speak on Wednesday to a congressional panel called the Joint Economic Committee. Although data continues to show economic improvement, the Fed has reiterated its commitment to keep benchmark interest rates near zero.
Also on Wednesday's agenda: the US Consumer Price Index and the government's data on retail sales, both for March. The overall CPI is pegged to rise 0.1 per cent in March from a flat reading in February, while core CPI, excluding volatile food and energy prices, is seen up 0.1 per cent, matching the previous month's gain, according to economists polled.