NEW YORK (CNN/Money) - So far, so very good.

One week into the earnings season and there is very little not to like. Companies in the S&P 500 that have reported so far are beating analyst estimates by, on average, 7 percent, according to First Call.

"There are a lot of upside surprises," said First Call strategist Joe Cooper. "It's just across the board."

Coming into the reporting period, analysts reckoned that companies in the S&P 500 would see earnings rise by around 15 percent over the year-ago period. Now it looks like they could easily top 20 percent.

For investors, the question is whether all the positive surprises have been factored into stock prices. Some Wall Streeters have complained that the market has made very little headway over the past week or so, considering all the swell news. And the way IBM's stock fell Thursday after hitting earnings estimates but missing on sales suggests expectations are really quite high.

Still, the notion that this would be a "sell on the news" earnings season has not come through. Further, the more you look through the reports, the more it seems like full-fledged recovery has arrived. With profits on the rebound, companies may even start hiring back workers again soon. It's hard to view that as anything other than a positive.

Companies in this report: 3M, Citigroup, Wells Fargo, Amazon, Lucent, Pfizer, Time Warner, Microsoft.

Like other companies that benefit most from a fast-growing economy, 3M has been on quite a roll this year.

The Dow member's stock is up 20 percent year-to-date, benefiting from the broad stock rally, the weak dollar and the belief that the economy is recovering.

642 802 696 322   382   582   companies reporting:     120   beat expectations:     79   met expections:     20   short expectations:     21   January 24, 2005 Fourth quarter 2004 warnings and surprises to date.

In the past months, the company reported stronger-than-forecast second-quarter earnings that grew from a year earlier, raised its full-year 2003 forecast and split its stock 2-for-1.

However, some analysts have expressed concern recently that the benefits of the weak dollar – more than 50 percent of 3M's business comes from overseas – could start ebbing, as could the company's ability to use cost cutting as a means of increasing profits. 3M's outlook and statement will need to address these concerns.

Why it matters: The Dow's other big cyclicals reported strong results. Everybody and their mother expect 3M to do the same. If they don't, something must be very wrong.

3M is one of the most important cyclical bellwethers out there because of the breadth of its industrial products and worldwide sales. What it says about its business will be seen as a proxy for a lot of other sectors and perhaps, the global economy as a whole.

First Call forecast: 79 cents per share versus 69 cents a year earlier.

With its strong position in consumer banking and its credit-card unit running along at a nice clip, it looks like yet another strong quarter for Citigroup. But investors will be keen to know what the nation's largest bank is going to do for an encore.

Depending on the consumer to continue to fuel profits is probably a nonstarter. Recent household spending growth seems simply unsustainable. As that decelerates, so will the use of credit. Citigroup is going to need its investment banking, corporate banking, private client and investment management businesses to take up the slack. Any signs of pickup in those areas will be taken as a sign of better things to come.

Why it matters: Citigroup needs to see the baton cleanly passed from its consumer-dominated businesses to its corporate- and stock-focused businesses. Turns out that's what the U.S. economy, which so far has been heavily reliant on consumer spending, needs as well.

First Call forecast: 85 cents a share versus 74 cents a year earlier.

Banks have reported solid third-quarter earnings so far, and Wells Fargo isn't expected to buck the trend. But for one of the biggest mortgage lenders around, the question is not whether it did well in the past quarter, but how it will fare in the current quarter and early 2004, when the mortgage boom that has added to its profits over the last year finally tapers off.

Interest rates bottomed in June at a 45-year low, and although they still are near historic lows, the rise in short-term rates and the signs of improvement in the economy have thrown a wrench into the mortgage boom. According to the Mortgage Bankers Association, the demand for refinancing at the end of the third-quarter was roughly half what it was at the beginning.

Analysts say that companies like Wells Fargo probably didn't feel the slowdown in the third-quarter because of a big enough reserve of back orders. But that slowdown could be more noticeable in the fourth quarter, they said.

Wells Fargo is broadly based enough that it can withstand the impact of a pullback in refinancing, analysts said. In fact, Moody's recently raised its debt rating on Wells Fargo to the second-highest investment grade, citing the company's strong banking operations, solid earnings and successful debt management.

Why it matters: If a big dog like Wells Fargo should surprise and say it's seeing earnings erosion because of the mortgage slowdown, that would be very bad news for the smaller, regional banks, which are more dependent on income from mortgage lending than their larger, more diversified counterparts.

First Call forecast: 93 cents per share versus 84 cents a year earlier.

At a time when many economists and market observers have expressed concerns about how much longer the U.S. consumer can keep spending, this does not appear to be a problem for Amazon.com. The online retailer is expected to post sales of $1.1 billion in the third quarter, up 31 percent from a year ago.

Amazon, like Yahoo! and eBay, has proven it is not only a dot.com survivor, but is a strong and growing company with a legitimate business model. Gone are the days when some bears were openly questioning if Amazon had enough cash to survive until it finally became profitable.

Still, valuation concerns have crept up again since investor infatuation with the stock is at levels not seen since Henry Blodget was a relatively unknown analyst at CIBC. Shares of Amazon have more than tripled so far this year and the stock trades at nearly 70 times 2004 earnings estimates. So Amazon probably will need to do more than just meet sales and earnings targets in order for the stock to keep climbing.

Why it matters: From a macroeconomic standpoint, upbeat comments about the fourth quarter could indicate that the U.S. consumer is still healthy as Amazon, like most retailers, generates a large portion of its annual sales and profits during the holiday season.

And investors' reaction to Amazon's earnings will be a good litmus test for how the market feels about tech stock valuations. If Amazon rallies on the news, then that could be a sign that techs still have a lot of momentum behind them.

First Call forecast: 10 cents a share versus nil a year ago.

It will be hard for telecom equipment manufacturer Lucent not to post a better fiscal fourth quarter than last year's, considering that a year ago it reported a nearly $3 billion quarterly loss and a sales plunge of more than 50 percent.

The company, like other gear makers Nortel and Ciena, has been hit hard by the economic slowdown as big customers such as AT&T, SBC and BellSouth have drastically cut back their capital spending plans. Lucent has laid off tens of thousands of workers during the past few years as a result.

Still, there are some signs, albeit small, that conditions are improving. Lucent's sales are expected to be 10 percent higher than the fiscal third quarter and only 5 percent lower than a year ago. But CEO Patricia Russo, speaking at a conference in Geneva this week, said it was premature to declare a recovery for the sector just yet.

Why it matters: Since Lucent's customers are the beaten-down telecom service providers, its news will paint an accurate picture of how the overall telecom market is doing. Although it's tough to imagine Lucent shocking Wall Street with a profitable quarter, there could be some pockets of strength for the company, such as its wireless equipment business.

Good news there would be further evidence of how wireless is rapidly becoming the growth engine for the Baby Bells and other telecoms. That would not be a positive for former Lucent parent, AT&T, which has no wireless division.

First Call forecast: A loss of 4 cents a share versus a loss of 84 cents a year ago.

The third quarter looks like it was good for Pfizer. It will be interesting to see if investors, who have been giving the big drugmaker the cold shoulder, will care.

With new products from competitors threatening its Viagra and Lipitor franchises, and worries over generic competition always nipping at its heels, Pfizer had a hard time catching a break, with its stock unbudged this year. It now trades at a lower P/E multiple than the market at large -- never mind that it has thrown off annual earnings growth of 25 percent over the past five years, compared to the S&P 500's zero.

Investors will want to see that Pfizer's integration with merger partner Pharmacia is continuing well and, more important, they will want the company to address how it is dealing with competitive dynamics.

Why it matters: Pfizer is settled into the same funk that many of its peers are in. Blame it on a crowded playing field, blame it on generics, blame it on the lack of any 1990s-style blockbusters (like Viagra and Prozac) in the pipeline, investors just aren't jazzed by Big Pharma like they used to be. Are earnings that grow through thick and thin worth ignoring?

First Call forecast: 44 cents a share versus 39 cents a year earlier.

The newly renamed Time Warner Inc. may have shed AOL from its name this week, but investors still will be looking for news out of the media conglomerate's Internet service provider unit when it reports before the market open Wednesday.

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The company, parent of CNN/Money, has seen relatively strong results from many of its old media units, such as Warner Bros. studios, Time Inc., Time Warner Cable and Turner Broadcasting, although some units, such as magazine publishing, are not seeing the robust revenue growth of the others. America Online and Warner Music both will come in for investor scrutiny again.

America Online is almost a year into a turnaround plan to convert subscribers to higher-cost high-speed connection rather than the more price-sensitive dial-up service. Since the end of last year it has seen a steady decline in the number of customers for the first time in its history.

Warner Music has been on the selling block as part of the company's efforts to shed non-core assets to cut its debt level. The problem at the unit result mostly from the industry-wide decline in CD sales due to online music downloads. The company has yet to announce its response to a move by industry leader Universal Music to dramatically cut CD prices.

Why it matters: Investors will be looking to see if AOL's new push for high-speed service and the promise of a new version 9.0 of AOL have stemmed the decline in subscribers. They'll also be looking for any signs of a turnaround in the long, hard decline in advertising revenue at the unit, as well as ad revenue growth at Time Inc.

Federal probes into accounting practices at America Online also are important to investors, both because of any hit the stock may take due to revelations and because the investigation is blocking plans to move ahead with an initial public offering of a stake in Time Warner's cable unit. What little comment company executives have made on the probe often has come during earnings conference calls.

First Call forecast: 10 cents a share, vs. 1 cent a share a year ago.

The world's most valuable company is in a bit of a transition mode right now. On the one hand, Microsoft is trying to position itself as an innovator at a time when investors have high expectations for a tech recovery. The latest version of its Office suite of software recently hit stores and the eagerly awaited new version of the Windows operating system is due out next year.

But Microsoft also is sending signs to the market that it is a mature firm. The company began paying a dividend to shareholders in March and announced in September that it was doubling it. And while big tech firms like Intel and Cisco are predicting doom and gloom if stock options have to be expensed, Microsoft simply decided to stop giving employees options and award them restricted stock instead.

Wall Street seems to think that Microsoft's best days are behind it. While the stock has run up 12 percent this year, this lags the much bigger gains of the Nasdaq and many other large software companies.

And perhaps Microsoft's biggest challenge now is convincing investors and computer users that it takes security concerns seriously. Hackers unleashed several viruses and worms aimed at machines running on Windows during the summer and Microsoft received a lot of publicity for vulnerabilities in its software. Some have argued that Microsoft, with nearly $50 billion in cash at its disposal, could do a better job of fixing security problems.

Why it matters: Despite high-profile efforts to diversify, Microsoft is still highly dependent on the health of the personal computer industry. So it will be interesting to hear what the company has to say about sales trends for its next quarter.

Positive results from Intel have created strong expectations for PC sales during the holiday season, and if Microsoft echoes that sentiment it could set the stage for strong fourth-quarter results and ensure that tech stocks will finish the year with a nice run.

First Call forecast: 29 cents a share versus 28 cents a year ago.