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Wall Street looks to earnings to confirm valuations

The stock market, while volatile, could be stuck in neutral in the near term, as investors wait for the next wave of corporate earnings to confirm valuations that have the S&P 500 not far from record highs.

"We've gone dramatically sideways so far this year; I don't see that changing until we get into the meat of the earnings season," said Paul Nolte, senior vice president and portfolio manager at Kingsview Asset Management.

That leaves investors watching lots of basketball games until the second week of April, joked Nolte.

Traders on the floor of the New York Stock Exchange.
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Traders on the floor of the New York Stock Exchange.

While some companies have already reported first-quarter results, including Lennar and ConAgra Foods on Thursday, the bulk of companies are expected to report first-quarter earnings between April 15 and May 2.

"We've had a handful of companies that have reported, and a lot of them blame the weather. Expectations were lowered and interest rates have come down, which paved the way for positive surprises," said Nick Raich, CEO of the Earnings Scout.

(Read more: The winter that was: What it cost us)

"You have full valuations in the market. That doesn't mean stocks can't go up more, but the news has to be more precise," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

And, while economic reports have recently been better, albeit it spotty, "we need more to prove a pattern is persisting, that we're back on track to better economic growth like we thought at the end of last year," said Luschini.

"We're back to needing earnings to do the heavy lifting," he added.

(Read more: Hedge funds: It's a stock-pickers market)

But for Raich, expectations for the economy and earnings have much to do with interest rates.

In view of current earnings expectations and the level of employment, the 3 percent threshold on the 10-year Treasury yield and 4.75 percent on 30-year fixed mortgages can't be raised "without having another adverse impact on overall earnings revision trends," said Raich.

"The market is at the higher end of valuation ranges, so we're hoping for, and expecting to see, better earnings numbers to be supportive of higher stock prices," said Nolte.

—By CNBC's Kate Gibson.

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

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