After a rally of almost seven months, stock investors will search earnings reports anxiously this week for signs that companies are seeing a pickup in demand.
Monday kicks off the busiest week in corporate America's earnings season. Roughly one-third of the Standard & Poor's 500 companies are scheduled to issue financial results, including heavyweights Citigroup Inc., Microsoft Corp., 3M Co., Merck & Co. and AT&T Corp.
Most investors anticipate a solid batch of earnings reports, and many are betting that a few standouts will carry the market higher this week. But even as the economic data point to a strengthening economy, some worry that the stock market has already priced in a big economic recovery.
"Companies are not only meeting analysts' expectations but beating them, and if that happens, we'll have a really good week," said Ozan Akcin, chief market strategist at Puglisi & Co. in New York.
Among the companies that have reported results, revenue forecasts have been encouraging, and a surprisingly large number have posted results that beat Wall Street forecasts, Akcin said.
Many investors say they will be taking an increasingly hard line when it comes to companies' outlook about future performance. In particular, investors are keen to see a rise in revenue. Top-line growth is seen as key to better earnings in the future and a stronger economy capable of creating jobs -- still a soft spot in the recovering economy.
Online auction company EBay Inc. felt Wall Street's disappointment Friday. Its shares fell sharply after it gave a forecast for next year that failed to top analysts' bullish expectations, even though it also said its quarterly profit soared 70%.
And on Thursday, investors punished shares of IBM Corp. after its chief executive said the technology sector had not yet bounced back, even after IBM reported earnings per share in line with analysts' forecasts.