For the first time in weeks, Federal Reserve officials are keeping a low profile and stocks may be more influenced by a rush of earnings news in the week ahead.
About a third of the S&P 500 companies report, with Apple, McDonald's, Boeing, Caterpillar, Pepsico and Facebook among them. There is also housing news, including existing home sales Monday and new home sales Wednesday. Durable goods are reported Thursday, consumer sentiment is Friday, and the government auctions $99 billion in 2-, 5- and 7-year notes Tuesday through Thursday.
Second-quarter earnings season has already had a few major bumps, and there could be a few more even as stocks sit at record highs. Of the roughly 20 percent of the S&P 500 companies that have reported as of Friday, 65 percent beat earnings estimates, and 51 percent beat on revenues, according to Thomson Reuters.
"Management is doing it again, where they have been managing expectations pretty well, heading into this quarterly reporting period," said Sam Stovall, chief equity strategist with S&P/Capital IQ. "Expectation were for a 2.9 percent rise in earnings and most recently we saw that the expectation is now for a 3.9 percent increase so if history repeats…then we normally would see the actual results be anywhere from four to five percentage points higher than where the original estimates were, so maybe we will see it around six to seven percent rather than the sub-three percent that was originally expected."
But revenues have been an area of disappointment. "The one thing I'm not seeing is the expected growth in revenues. Early on, we were looking for revenues to be up a half of a percent. Now, they're expected to be down 1.2 percent, and down 2.4 percent without the financials," Stovall said.
The S&P 500 rose 0.7 percent for the week, ending at a new high of 1692. The Dow reached a new high during the week, but closed a bit lower at 15,543, still up a half percent for the week. The Nasdaq, slammed by steep declines in some tech names, fell 0.4 percent for the week to 3,587.
In the past week, Fed chairman Ben Bernanke testified twice before Congress and for the first time in weeks, discussion of the Fed's pullback from its bond buying program did not result in violent market swings. Bernanke re-emphasized that the Fed will slow down its $85 billion a month in bond purchases, when the economic data warrants.
(Read more: Bernanke gets what he wants: A big yawn)
Bernanke has said the Fed could begin winding down the program by year end, and many analysts expect it start paring back purchases as early as September. The Fed has also assured markets that pulling back on its bond purchases does not mean it will begin to raise short-term interest rates.
The Fed speaking calendar is quiet this coming week, ahead of the next FOMC meeting July 30 and 31.
Even so, stock traders are keeping a close eye on bond yields, which they fear could start to trip up stocks if they move too high. But the 10-year yield retreated back below 2.5 percent Friday, and was yielding 2.48 percent in late afternoon.
Treasury prices were lifted Friday, and yields slipped, as investors sold municipal bonds in response to the bankruptcy filing by Detroit. Traders said muni investors moved into Treasurys and funds experienced heavy outflows, as investors weighed the consequences of the biggest municipal bankruptcy ever.
(Read more: Detroit bankruptcy could hit millions of retirees)
It's early in the earnings season, and the overall message so far is mixed. There have been a number of high profile tech misses, like Microsoft, Google and Intel, and as of Friday morning, S&P tech sector earnings were showing a 5.5 percent decline, but financial firms in the S&P 500 have seen better than expected earnings growth of about 24 percent, according to Thomson Reuters.
"So far this quarter, domestically-oriented stocks have been outperforming," said Knapp. "This quarter, domestic revenues are starting to go up, which makes perfect sense given those stocks have been telling you that for six months." Companies with foreign-derived revenues remain under pressure."
Thomson Reuters analyst Gregory Harrison studied revenues of 50 of the companies that have reported earnings so far. The companies with a high percentage of revenue coming from the U.S. grew revenue by 4.6 percent, while the companies with less than half of revenue coming from the U.S. only grew revenue by an average 1.6 percent, he notes.
General Electric, which reported earnings Friday, said its domestic-order growth rose by 20 percent in the second quarter, and it reported a backlog of services and equipment at the end of the second quarter was $223 billion, a record high. The company also said it was able to increase pricing by 0.9 percent.
Stovall believes that earnings could be troughing this quarter, and he expects better results in the second half of the year. He also expects the S&P to easily rise above 1700.
Andrew Burkly, Oppenheimer Asset Management head of institutional portfolio strategy, said he also expects earnings growth to come in about double the amount initially expected. He also expects stocks to take a run at 1700, but he said he is concerned that the forecasts for second half earnings are too high.
"I do think it's going to be volatile. Maybe we get that 10 percent correction as we get to late summer or fall because earnings are too high," he said. Burkly also doesn't believe the economic data will be strong enough for the Fed to taper bond purchases by September.
Scott Redler, who trades the market's short-term technicals, said the market is taking earnings in stride, but individual names have had big moves. Microsoft "As of right now, the theme has been light revenues and earnings have been okay due to buybacks and cost reductions, but the Street's gotten used to that," he said.
What the Street hasn't gotten use to is the market's gains, he said, noting it is still the most hated rally.
"Every few months another milestone happens, but every one still asks if the rally is for real," he said.
What to Watch (all times ET)
10:00 am Existing home sales
Earnings: Apple, AT&T, Norfolk Southern, Dupont, Altria, Travelers, UPS, CIT Group, Illinois Tool Works, Lockheed Martin, Peabody Energy, Valero, Panera Bread, AK Steel, Wendy's, Domino's, Nabors Industries, Discover Financial, Broadcom, Altera
09:00 am FHFA home price index
10:00 am Richmond Fed
01:00 pm $35 billion 2-year note auction
Earnings: Boeing, Caterpillar, Eli Lilly, Ford, Facebook, Qualcomm, GlaxoSmithkline, Pepsico, General Dynamics, Nasdaq OMX, Dr. Pepper Snapple, Northrop Grumman, Cheesecake Factory, Baidu, Visa, Akamai, F5 Networks, Ethan Allen, Trip Advisor, Citrix Systems, Cabot Oil and Gas
07:00 am Mortgage applications
08:58 am PMI flash
10:00 am New home sales
10:30 am Oil inventories
01:00 pm $35 billion 5-year note auction
Earnings: General Motors, Amazon.com, Starbucks, Diamond Offshore, Bristol-Myers, 3M, Biogen Idec, Boston Scientific, Colgate-Palmolive, TransCanada, Credit Suisse, Dow Chemical, International Paper, Hershey, Expedia, Newmont Mining, Cliffs Natural Resources, Pulte Group, Sirius XS Radio, Under Armour, Zynga, Tempur Sealy, Potash
08:30 am Weekly jobless claims
08:30 am Durable goods
11:00 am Kansas City Fed Survey
01:00 pm $29 billion 7-year note auction
Earnings: Total, Newell Rubbermaid, Stanley Black and Decker, Tyco, Weyerhaeuser
09:55 am Consumer sentiment