While the latest earnings are widely expected to show a sharp improvement compared with the abysmal 2008 fourth quarter, the stock market could still be in for choppiness if company reports do not point to improved demand.
Aluminum company Alcoa is due to post its fourth-quarter results today, marking the unofficial start of the reporting season.
Chipmaker Intel is scheduled to release its quarterly scorecard on Thursday, followed by JPMorgan Chase on Friday.
The quality of the earnings, as well as company outlooks, will be closely scrutinised to determine if the optimism that has driven the S&P 500 stock index to 15-month highs is warranted.
For the first week of the new year, the Dow rose 1.8 per cent, the S&P 500 climbed 2.7 per cent and the Nasdaq shot up 2 per cent. The S&P 500 has risen 69 per cent since last March. Whether companies can give a clear picture of improving prospects will be a major concern for investors, a strategist said.
“Has visibility picked up for 2010? That’s going to be more of a driver going forward,” said Mike O’Rourke, chief market strategist at BTIG, an institutional brokerage firm, in New York. “I think companies are still going to be cautious with their guidance and their outlooks.”