This week's rush of quarterly earnings from icons like chip leader Intel Corp. and banking titan Citigroup Inc. may give the stock market another jolt higher as Corporate America hints at an improving economy.
The next two weeks mark the most hectic period of the second-quarter earnings reporting season. Investors are betting the quarterly results will help justify Wall Street's double-digit run-up since major market gauges hit 2003 lows on March 11.
"We have obviously rallied pretty strongly, and we just need confirmation that second-quarter earnings are going to catch up to the market," said Joe Kalinowski, director of research at Puglisi & Co. "I anticipate we are going to have a pretty strong reporting season."
Stocks may trend higher this week. But the rally could lose some steam after its blistering surge over the past four months. Federal Reserve Chairman Alan Greenspan delivers his semi-annual monetary policy testimony before Congress after the central bank said at the end of June that the US economy has yet to exhibit sustainable growth.
A stream of economic reports on retail sales, manufacturing activity, consumer prices, jobless claims and consumer sentiment will also test investor mettle in the coming days.
"Any price weakness that occurs is going to be viewed as a buying opportunity in the market, and I expect prices to trend higher over the next two weeks," said Paul Cherney, chief market analyst of Standard & Poor's. "But the upside is going to be limited."
Twelve components of the Dow Jones Industrial average and about 120 companies in the Standard & Poor's 500 index are expected to report their quarterly earnings this week.
The big names in the rush of companies posting results include Intel, Citigroup, Johnson & Johnson, Merrill Lynch & Co. Inc., Motorola Inc., International Business Machines Corp., Advanced Micro Devices Inc., Ford Motor Co., J.P. Morgan Chase & Co. Inc., Caterpillar Inc. and Microsoft Corp.
The volume of earnings warnings leading up to the reporting season proved light, leading many market watchers to bet corporate results will land in line or better than expected over the next few weeks.
"I think by and large earnings will come in as expected to plus," said Stanley Nabi, managing director at Credit Suisse Asset Management, which oversees $292 billion globally. "They will be on the positive side. I don't think they will be runaway, but they will be on the positive side."
Wall Street analysts are expecting that S&P 500 companies will post earnings growth of 5.2 per cent in the second quarter versus the same period last year, according to research firm Thomson First Call.
Mr Greenspan will testify before the US House of Representatives' Financial Services Committee tomorrow and before the Senate Banking Committee on Wednesday.
The Fed chief delivers formal testimony on the economy before the congressional panels twice a year - offering the Fed's outlook on the economy - and takes questions afterward.