Stocks are expected to rise this week as investors focus on the start of the third-quarter earnings reporting season, which has generated a good buzz.
The market should build on its gains this week as corporate profits may be better than expected, analysts say. With very few earnings warnings in the run-up to the reporting period, it could turn into a good quarter.
"Earnings ought to be driving the bus [this] week," said Phil Orlando, chief portfolio manager at Federated Investors. "I think stocks will continue to run because the expectation we have for earnings for the quarter is that the numbers are going to surprise to the upside."
This week's earnings reports include aluminum producer Alcoa Inc.'s results tomorrow. It is the first among the 30 companies whose stocks make up the blue-chip Dow Jones industrial average to report for the quarter. Dow stalwart General Electric Co., whose businesses range from television broadcasting to jet-engine manufacturing, posts its third-quarter earnings on Friday.
"The week might be a little bit slow as far as earnings are concerned," said Ozan Akcin, chief market strategist at Puglisi & Co. But "they certainly pick up the week after that, though.
"I will say things are looking really, really good. Our calculations are that the consensus is expecting 14 per cent year-on-year growth for the third quarter... I'm pretty sure we're set to surprise on the upside."
With very few companies warning that third-quarter earnings may not hit expectations, the outlook for corporate earnings is bright.
"We've just gone through the confessional season and arguably it should have been extraordinarily brutally ugly as the September/October confessional season ordinarily is," Mr Orlando said. "But it was extraordinarily quiet. You look at the companies who stepped forward and guided lower and they were few and far between."
US stocks surged last Friday, rising for the third straight session, as a report showing that employers added new jobs in September for the first time in eight months propped up investors' optimism about the US economic rebound.
The technology-laced Nasdaq Composite Index jumped 44.35 points, or 2.42 per cent, to 1,880.57, according to the latest data, while the the blue-chip Dow climbed 84.51 points, or 0.89 per cent, to 9,572.31. The broader Standard & Poor's 500 Index gained 9.61 points, or 0.94 per cent, to 1,029.85.
The surge on Friday helped push stocks up for the week. The S&P 500 gained 3.3 per cent for the week, notching its best weekly gain since April. The Dow advanced 2.8 per cent for the week and the Nasdaq shot up 4.9 per cent, their biggest weekly percentage gains since May.
This week's data may pale in comparison to the Labour Department's report on Friday, analysts said.
The number of workers on US payrolls outside the farm sector grew by 57,000 in September, the first time since January that jobs were created and sharply contrary to Wall Street economists' forecasts for a 30,000-job loss.
The gain was not big enough to bring down the unemployment rate, which was unchanged at 6.1 per cent in September. But analysts said it was encouraging after seven straight monthly declines in jobs.
"Next week has a good base to start with, considering the employment report and at least a modest shift in the bear's attitude toward the sustainability of the economic recovery," Ned Riley, chief investment strategist at State Street Global Advisors in Boston, said on Friday.
"Starting the month with such an encouraging trend on the employment side is a pretty good foundation to carry the markets higher, particularly over next week and the rest of the year."