For Stocks, It's All About Earnings in the Week Ahead

NEW YORK (Reuters) - The stock market is set to continue its winning ways in the coming week as momentum builds during earnings season.

The latest quarterly reporting period is off to a strong start, but next week will be crucial to hopes that revenue growth has returned triumphant, as opposed to earnings surprises resulting mostly from cost-cutting.

Six Dow components and some of the biggest banks are in line for scorecard reporting. This time last quarter, during the first full week after Alcoa's results, the S&P 500 index <.SPX> rose 7 percent. It has not had a better week since, but if earnings continue the trend established by early results, investors may keep buying stocks.

"There's enough room for upward movement," said Kim Caughey, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. "Not another 60 percent, but still."

Expectations of economic recovery have fueled a nearly 60 percent gain in stocks since the doomsday levels of early March. On Friday, the Dow Jones industrial average <.DJI> hit a fresh 2009 closing high.

But such a breathtaking rally has some analysts wondering if the stock market has too much good news priced in. Analysts' expectations are loftier this time around, removing one of the catalysts that buoyed the market in the last two periods.

"The concern is heightened by the fact that analysts have been revising estimates up at one of the most aggressive paces in over a year," said Carmine Grigoli, chief U.S. investment strategist at the equity division of Mizuho Securities USA Inc in New York.

"This was not the case in the last two earnings reporting seasons, when the market did so well."

Despite the revisions in various sectors, earnings are expected to fall more than 25 percent compared to a year ago, according to data compiled by Thomson Reuters. Arguably, the bar is still set low, even if people have already factored this into projections.

Earnings "should support the market averages where they are and maybe give a minor boost," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co in Lake Oswego, Oregon.