First Quarter Earnings Will Make or Break Market Rally

Diver

A rally in the U.S. stock market has gained traction over the past month, but holding onto its recent gains could prove difficult this week as investors catch a glimpse of the first batch of first-quarter earnings reports.

The Dow Jones Industrial Average wrapped up its best four-week run since 1933 last week after the economy showed signs of improvement and world leaders at the Group 20 meeting in London pledged more than $1 trillion to ending the first global recession since World War II.

However, the key to sustaining the rally will be this week’s quarterly earnings reports. Tuesday officially kicks off the first quarter earnings season, and aluminum producer Alcoa Inc (AA) will be the first Dow Jones industrial to report.  While many analysts expect the overall earnings results to be weak again, many are hopeful that the past three months represented an ever-so-slight rebound from the 4th quarter.  (And, any rebound would be deemed positive these days.)  After all, companies had been engaged in all kind of cost-cutting measures from layoffs to plant closings to dividend reductions to (forced) bonus restrictions.