MARTIN SLANEY<br /><strong>HEAD OF DERIVATIVES, GFT</strong><br /><br />DO not underestimate just how important this week is for the markets. The next few days are likely to prove decisive in determining the near-term direction of global stock markets. And it’s all down to earnings. <br /><br />In the first quarter, the overriding concern was whether we were facing meltdown, and in the second quarter it was a question of looking for signs of stability, in this most recent quarter we are looking for growth. Not just a few surprises on the back of cost-cutting, but actual revenue and sales growth.<br /><br />The “season” kicked off last week. It got off to a formidable start too, with Alcoa – the traditional inaugural blue-chip announcement of the season – reporting its first profit in a year. The aluminium giant, seen as a bellwether for industrial stocks, beat market expectations and helped push the Dow to its highest close of the year.<br /><br />This week could be even more pivotal, with many major names and Dow component stocks due out, not least some of the banking big guns such as JP Morgan, Goldman Sachs, Citigroup and Bank of America. But then we also have Intel, General Electric, Johnson & Johnson, IBM and Google. If pressed I would say that the markets could attach most weight to the numbers from Bank of America. We all know that Goldman will announce recession-defying profits and bonuses. JP Morgan will also be profitable and Citigroup will still be a loss-maker. But Bank of America’s numbers, out on Friday, could go either way.<br /><br />As far as what sort of earnings season we can expect overall, good or bad, I discussed in this column last week that the chances for down-side surprises against consensus are relatively low, and that overall the market should at least hold its own if not progress higher: 10,000 on the Dow looks like a realistic level which we will see this year, but maybe like it will even become synonymous with the third quarter results.<br /><br />Saying we could even breach that level this week would be a rather foolish prediction to make right here, but if ever any evidence were needed of just how crucial this coming week could be, here it is: during this same week last year, the one following the week in which Alcoa reported, US stocks rallied 7 per cent. I know which side of the market I would rather be on.