Wall Street: Here comes the hard part
Investors wade into the heaviest week of corporate reporting yet. Reports on GDP, housing, consumer confidence and manufacturing also due.
NEW YORK (CNNMoney.com) -- Can a recharged stock market rally withstand the biggest week of corporate profit reports yet?
"As long as earnings continue to surprise to the upside and revenues aren't disasterous, the market should move higher in this period," said Timothy Ghriskey, chief investment officer at Solaris Asset Management.
"But then we get to August, when Wall Street tends to go on vacation and you could see some consolidation then," he said.
This week brings profit reports from 146 of the S&P 500 companies, or 29% of the broad index. That list includes a number of oil services firms, including Dow components Chevron and Exxon Mobil.
Other big companies due to report include Dow stocks Travelers, Walt Disney and Verizon Communications.
"Given the pessimistic outlook going into the earnings period, the results have been pretty good so far, spurring the last week or so of gains," said Karl Mills, president and chief investment officer at Jurika Mills & Keifer.
"But the economic recovery is going to be a jerky W and the market will probaby follow the same pattern," Mills said. "For stocks, we're probably near the top of the current upswing."
But for the last two weeks, stocks have surged, with the Dow, S&P 500 and Nasdaq composite all back at October-November levels as investors welcomed better-than-expected earnings from a rash of companies. But a late Thursday one-two punch of disappointing results from Microsoft (MSFT, Fortune 500) and Amazon.com (AMZN, Fortune 500) reminded market makers that "less bad" profits doesn't mean good profits.
Stocks slipped in the month ahead of the start of the earnings period, as investors worried that corporate profits would disappoint and that the market had gotten ahead of any economic recovery.
This week also brings a batch of potentially market-moving economic news, including readings on housing, consumer confidence, durable goods orders and gross domestic product growth.
Eye on corporate reports: Approximately 37% of the S&P 500 has reported, and the results have generally been better than expected, with earnings growth outpacing revenue growth.
Profits are expected to have dropped over 30% versus a year ago, according to earnings tracker Thomson Reuters.
So far 77% of the companies that have reported results have beat expectations -- reflecting both corporate pessimism and analyst skepticism in the weeks heading into the reporting period.
That 77% figure will likely come down a bit by the time all the results are in, said John Butters, senior research analyst at Thomson Reuters. But if that number holds up, the second quarter will mark the highest percentage of upside surprises since Thomson began tracking results in 1998.
"It's really been companies across the board beating, with most sectors running higher," Butters said. "But the caveat is we have more than 60% of the S&P 500 less to go, so the results will probably change."
Monday: Dow component Verizon Communications (VZ, Fortune 500) is due to report results in the morning. The telecom is expected to have earned 63 cents per share versus 67 cents a year earlier, according to a consensus of analysts surveyed by earnings tracker Thomson Reuters.
Wednesday: Sprint Nextel (S, Fortune 500) is expected to report a loss of 2 cents per share versus a profit of 6 cents a year ago. CNNMoney.com parent Time Warner (TWX, Fortune 500) is expected to have earned 37 cents per share versus 24 cents a year ago.
Monday: The Commerce Department releases its new home sales index after the start of trading. Sales are expected to have rise to a 355,000 unit annualized rate in June, according to a consensus of economists surveyed by Briefing.com. Sales stood at a 342,000 unit annualized rate in May.
Tuesday: The July consumer confidence report from the Conference Board is expected to show continued weakness as consumers remain wary about the economic outlook. The index is expected to have fallen to 48.7 from 49.3 in June.
The S&P/Case-Shiller Home Price index is expected to have fallen 17.8% in May versus a year ago, after falling 18.1% in April.
Wednesday: The June durable goods orders report, from the Census Bureau, is due in the morning. Orders are expected to have fallen 0.5% after rising 1.8% in the previous month. Orders excluding transportation are expected to have risen 0.1% in June after rising 1.1% in May.
The weekly crude oil inventories report from the Energy Information Administration is also due in the morning. In the afternoon, the Federal Reserve releases its periodic "beige book" report on economic activity in its 12 districts.
Thursday: Weekly unemployment claims are due in the morning. The number of Americans filing new claims for unemployment is expected to have risen to 585,000 from 554,000 in the previous week.
Friday: The initial reading on second-quarter gross domestic product growth is due in the morning. GDP is expected to have contracted at a 1.5% annualized rate, according to forecasts. GDP shrank at a 5.5% annualized rate in the first quarter.