New York (Reuters) Profits from top US technology companies like IBM and financial companies like Goldman Sachs Group this week could help stocks gain as long as investors see room for more profit growth.
Stronger-than-expected results late on Thursday from tech bellwether Intel Corp failed to excite investors on Friday, while steep loan losses reported by JPMorgan Chase & Co dragged down the market.
The benchmark Standard & Poor's 500 index rose 23.5 per cent last year, with information technology the top-performing sector. It jumped 60 per cent, raising questions about whether the sector may have become too expensive.
"It's all about how fast they can grow earnings to catch up to those valuations," said Jeff Kleintop, chief market strategist at LPL Financial in Boston.
"This is a business spending-led recovery rather than consumer recovery ... so I think earnings growth will remain above average and justify those valuations."
Heavy toll
Fourth-quarter results are expected to show a sharp improvement compared with 2008's last quarter, when the economic downturn took a heavy toll on corporate profits.
S&P 500 earnings for the quarter are forecast up 186 per cent versus a year ago, according to Thomson Reuters estimates. It would be the first quarter that S&P 500 company earnings grew year over year since the second quarter of 2007. This week the earnings period accelerates, with some 57 S&P 500 companies reporting.
International Business Machines Corp is scheduled to post results on Tuesday while Google Inc is expected on Thursday. Among financials, Goldman Sachs is expected on Thursday, while Bank of America and Morgan Stanley should report on Wednesday.
For the second week of the new year, the three major indexes lost ground. The Dow Jones industrial average was down 0.1 per cent, while the S&P was down 0.8 per cent and Nasdaq was down 1.3 per cent.
The S&P 500 is still up 68 per cent since its early March lows, largely because of stronger-than-expected earnings and economic data. On the economic front, data that could influence stocks this week includes reports on housing starts, prod ucer prices and leading indicators.
