Earnings Likely to Determine Stock Rally's Future

The stock market's bulls are slowing their charge, and upcoming earnings reports will determine whether they keep going forward or just stop.

A two-week slump in response to disappointing economic numbers has investors asking whether the market's powerful rally is fading on what would be the start of its eighth month. Analysts have been calling for a break in the ferocious advance, but now that it's here, even many who expect further gains are adopting healthy caution.

This year's rally has lifted major stock indexes more than 50 percent from 12-year lows on March 9 and pumped new life into beaten-down investment accounts. Now, though, questions about whether the gains are justified are more urgent because stocks are worth far more than they were only months ago. The market jumped 15 percent in the July-September period.

The economic reports of the past two weeks are stirring concern that investors have been too quick to bet on a recovery. The government said Friday that employers cut more jobs in September than in August. Other recent reports on everything from factory orders to the mood of consumers have brought reminders of the economy's troubles. The Dow Jones industrial average is down 3.4 percent in two weeks.

No one expected a seamless recovery but the string of lackluster data has come as investors have little else to go on. Reports on corporate profits, which are the biggest drivers of the stock market, will only start trickling in this week.

The third-quarter reports could give investors a better sense of whether companies managed to bring in more revenue to produce earnings growth or whether they again resorted to steep cost-cutting to boost their bottom lines as with the April-June period.

Analysts and investors want to see revenue growth because cost-cutting can only be taken so far.

Aluminum producer Alcoa Inc., PepsiCo Inc. and Marriott International Inc. are slated to report during the week as is Yum Brands Inc., the parent of the Pizza Hut, Taco Bell and KFC fast-food chains.