Wall St Week Ahead: Stocks to track earnings with an eye on Europe

Sat Apr 14, 2012 12:34am GMT

By Chuck Mikolajczak and Caroline Valetkevitch

NEW YORK, April 13 (Reuters) - After suffering their worst two weeks of the year, stocks will look to quarterly earnings to determine whether the recent pullback has been exhausted or more losses are justified.

Alcoa Inc opened the earnings season with a bang, reporting a first-quarter profit on Tuesday instead of the expected loss. That positive surprise foretold a trend. Of the 32 companies in the S&P 500 that have reported earnings so far, Thomson Reuters data showed that 75 percent - or two dozen - have beaten Wall Street's expectations.

Next week will start one of the two busiest weeks of the quarterly earnings reporting period. About 86 companies in the Standard & Poor's 500 are expected to post results, according to Thomson Reuters Director's Report.

At Friday's close, both the Dow Jones industrial average and the S&P 500 wrapped up their worst two-week percentage drops since late November. The Dow and the S&P each fell 2.7 percent for the two weeks from the close on March 30.

"It seems like everybody's been waiting for this so-called correction to potentially get back into the stock market," said Kei Sasaki, managing director of listed equities at PineBridge Investments in New York, which has $67 billion in assets under management.

"But I'd point to the extremely high levels of correlation within equity markets that we saw in 2011. That was coupled with heightened volatility in 2011," Sasaki added. "Even with the down moves in the market over the past several days, the volatility has stayed relatively subdued.

"The correlations on a moving average have also stayed relatively subdued, which tells us that investors are still looking at the market in a fundamental way that they haven't for the past year. So if earnings come in positive for the first quarter, we think they will get rewarded for it," he said.

Among the marquee names on next week's earnings calendar are 10 Dow components: Intel Corp, Johnson & Johnson , Coca-Cola Co, DuPont, Microsoft, The Travelers Companies Inc, Verizon Communications Inc , American Express Co, General Electric Co, and McDonald's Corp.   Continued...

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