Bracing for earnings season kickoff

NEW YORK (CNNMoney.com) -- Economic optimism has been fueling gains on Wall Street for weeks but investors may be in for a bumpy ride ahead, as the quarterly reporting period gets underway.

Dow components Alcoa, Intel and JPMorgan Chase all report quarterly results this week.

Despite some lackluster churning last week, the stock market managed to end the first trading week of 2010 in positive territory. The Dow industrials and S&P 500 now stand at 15 month highs and the Nasdaq composite is at a 16-month high.

Whether the market can sustain and build on last year's gains will depend on employment, corporate profits and whether the consumer can pick up the slack when the government stimulus runs out, said Brett Hammond, chief investment strategist at TIAA-CREF.

"Most companies have cut costs but they haven't grown revenue yet," Hammond said. "The question is whether corporate profits can rise in a time when American consumers can't step up to the plate."

Eye on earnings: S&P 500 earnings are expected to have jumped 213% in the fourth quarter of 2009, thanks to easy comparisons to an abysmal fourth quarter of 2008, the worst quarter in the history of earnings tracker Thomson Reuters. In that quarter, profits plunged 67% as the crisis in the financial and auto sectors hit a nadir, credit remained frozen and the recession intensified.

But a gain of 213% needs to be taken with a gallon of salt, because it mostly reflects the about face in the financial sector. The sector saw a quarterly loss in the fourth quarter of 2008 that was unprecedented -- so substantial that Thomson isn't fully sure it will be able to measure how much of a jump the sector posted year-over-year in the fourth quarter of 2009.

On Monday after the close, Alcoa (AA, Fortune 500) kicks off the quarterly reporting period, as it traditionally does. The aluminum producer is expected to have earned a profit of 6 cents per share versus a loss of 28 cents a year ago, according to Thomson Reuters forecasts. Alcoa is also expected to report a 15% drop in revenue.

On Thursday after the close, Intel (INTC, Fortune 500) is expected to report a quarterly profit of 30 cents per share versus 4 cents a year ago. The chipmaker is also expected to report a 23% rise in quarterly revenue.

On Friday morning, before the start of trading, JPMorgan Chase (JPM, Fortune 500) is expected to report a profit of 63 cents per share versus 7 cents a year ago. The bank is also expected to report a 57% rise in revenue.

The fact that many of the big banks that helped bring the economy to the brink of disaster are now profiting nicely one year later is a major source of anger and frustration for many investors, particularly since taxpayers helped fund their bailouts.

This week marks a step toward addressing those concerns and investigating further why the crisis happened, when the Financial Crisis Inquiry Commission holds its first public hearings on Wednesday and Thursday in Washington.

The bipartisan commission will hear testimony from some of the nation's top bank executives including Goldman Sachs' Lloyd Blankfein, Bank of America's Brian Moynihan, Morgan Stanley's John Mack and JPMorgan Chase's Jamie Dimon.

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