Wall Street’s Wild Week Kicks Off with Big Earnings

Will this week’s earnings reports put a major ding in Wall Street’s recent gains? Answers will arrive as early as Monday, when Alcoa (NYSE:AA) delivers its report and starts testing the resilience of U.S. markets. Though there were few signs of investors wavering during and after the Cyprus bailout, discouraging earnings reports could be the news that finally halts the bullish run.

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By nearly all accounts, earnings are not going to impress investors. MarketWatch’s Wallace Witkowski notes that over 78 percent of S&P 500 companies are supplying outlooks that are below the Wall Street consensus. Five-year averages are closer to 60 percent. JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) will weigh in with earnings reports on Friday, which could impact the markets significantly. JPMorgan can ill-afford much more bad news as shareholder groups attempt to censure CEO Jamie Dimon.

The jobs reports released on Friday made a bad week for the S&P 500 slightly worse. The S&P had its worst trading week of 2013, after hitting its all-time high on March 28. The momentum is clearly swinging in one direction, leading analysts to believe that effects from Cyprus are finally being felt, as is the rise in payroll tax. Reports will include figures of the first quarter since American workers began taking home less pay in every check…

Another key for Wall Street’s wild week ahead is what happens on Wednesday at the Fed. The release of the latest FOMC meeting’s minutes will offer investors an idea of how far the central bank is willing to relax monetary policies. Subsequent speeches by Fed officials have the potential to cause a stir on Wall Street, depending on how their remarks are interpreted. Finally, Friday will mark the release of retail figures by the U.S. Commerce Department.

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Analysts are noting how investors are backing away from consumer stocks, believing the payroll tax hike is poised to do further damage to sales. This movement is opening the door for favorable purchases in stocks considered risky. According to the data, the best stock performers are companies whose earnings forecast was the most accurate. Investors are valuing trust above other factors when adding money to a portfolio. More bad news from Wall Street could add momentum to this trend.

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