Stocks brace for earnings test

NEW YORK (CNNMoney) -- Stocks kicked off 2011 with gains last week despite lackluster economic news, but the week ahead could be more challenging as the quarterly earnings season gets underway.

Dow components Alcoa (AA, Fortune 500), Intel (INTC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) all report quarterly financial results next week. Apollo Group (APOL) and homebuilder Lennar (LEN), which are both among the S&P 500 companies, will also open their books.

S&P 500 earnings are expected to have climbed 32% in the fourth quarter of 2010, according to earnings tracker Thomson Reuters. Revenues of the companies in the benchmark index are expected to have risen 6%.

The final quarter of 2009 was the first period in which companies began reporting profits, following nine straight quarters of losses. In that quarter, profits jumped 205% while revenues rose 8%.

The rebound in earnings growth came as firms made deep cuts in their expenses and pinched profit margins. This year, investors are looking for improving revenue growth.

"We've started to see top line revenue growth in addition to earnings growth during the past couple quarters, and investors want to make sure that remains consistent," said Ron Kiddoo, chief investment officer at Cozad Asset Management. "If there's any decay in that trend, that will be troubling for the market."

Kiddoo added that investors will also keep a close eye on earnings forecasts.

"In recent quarter, companies have been reluctant to provide any guidance on their earnings, but it's important for companies to bring those back to the table," he said. "A company can come in and knock our socks off with earnings, but if it doesn't pair that with a positive outlook, the earnings are a waste."

Economic news is fairly light at the start of the week but starts flooding in on Thursday. Investors will be paying close attention to more readings on the job market, inflation, the retail sector and consumer sentiment.

Monday: After the closing bell, Alcoa (AA, Fortune 500) will report its fourth-quarter results. The Dow issue is expected to have earned 19 cents per share, up from 1 cent a year ago, on revenue of $5.7 billion, according to analysts polled by Thomson Reuters.

Apollo Group (APOL), owner of the University of Phoenix, is also expected to report earnings after the bell.

There are no market-moving economic reports expected on Monday.

Tuesday: The Commerce Department releases the wholesale inventories report in the morning. Inventories are expected to have risen 1.3% in November after jumping 1.9% in October.

Lennar (LEN), one of the nation's largest homebuilders, posts quarterly earnings before the opening bell.

Wednesday: Reports on import and export prices, and weekly crude oil inventories are due in the morning.

The December Treasury budget is on tap for the afternoon, as well as the Federal Reserve's Beige Book report on economic conditions across the central bank's 12 districts.

Thursday: The Department of Labor releases the weekly jobless claims report in the morning. The number of Americans filing new claims for unemployment is expected to have climbed to 420,000 last week from 409,000 the previous week.

Continuing claims -- a measure of Americans who have been receiving benefits for a week or more -- is expected to have fallen to 4.07 million from 4.10 million in the previous week.

The Producer Price Index, a measure of wholesale inflation, is due out from the Commerce Department at the same time. The index is expected to have edged up 0.7% in December after rising 0.8% in November. The so-called core PPI, which strips out volatile food and energy prices, is expected to have risen 0.2% after increasing by 0.3% in the previous month.

The trade balance, also due in the morning from the Commerce Department, is expected to have widened to $40.6 billion in November from $38.7 billion in October.

In the afternoon, Federal Reserve Chairman Ben Bernanke will speak at the Federal Deposit Insurance Corporation's forum on small business lending.

After the closing bell, Intel (INTC, Fortune 500) is expected to report a quarterly profit of 53 cents per share versus 40 cents a year ago. The chipmaker is also expected to report a 8% rise in quarterly revenue.

Friday: Before the start of trading, JPMorgan Chase (JPM, Fortune 500) is expected to report a profit of 98 cents per share versus 74 cents a year ago. Revenues at the bank, however, are expected to slip 3%.

The Commerce Department releases the Consumer Price Index, a measure of consumer inflation, in the morning. CPI is expected to have increased 0.4% in December after rising 0.1% the previous month. Core CPI is expected to have inched up 0.1%, after rising the same amount in November.

The Commerce Department also reports on retail sales before trading starts. Sales are expected to have gained 0.7% in December after having increased the 0.8% in November. Sales excluding volatile autos are expected to have ticked up 0.6% after a 1.2% rise the previous month.

The Federal Reserve reports on manufacturing activity in the morning. Industrial production is expected to have increased 0.4% in December after rising 0.8% in November. Capacity utilization is expected to have risen to 75.5% in December from 75.2% in the previous month.

The University of Michigan's consumer sentiment index for January is expected to have risen to 75.0 in early January from 74.5 in late December.

November business inventories, due after the start of trading, are expected to edged up 0.7% after rising the same amount the previous month.