News of a debt settlement proposal between Greece and the European Union eased U.S. investor worries on Monday, putting earnings back in focus.
Analysts are particularly interested in consumer firms and small-cap stocks, which are only just beginning to report their fourth-quarter earnings and actually benefit from a stronger U.S. dollar.
"Because of the strong dollar, you're seeing a rotation out of the larger S&P constituents into smaller caps (that focus on the U.S. consumer)," said Dan Veru, chief investment officer at Palisade Capital Management.
"Consumer-oriented companies are likely to see better earnings results. So far we've only heard from banks and wholesale firms," said Jack Ablin, chief investment officer at BMO Private Bank.
UPS, health insurance provider Aetna, oil giant BP and luxury brand LVMH report before the bell.
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Chipotle and Disney report after the bell on Tuesday. Last year's strong healthcare performers Gilead Sciences and Edwards Lifesciences will also post earnings then.
Stocks struggled for much of Monday to find a direction, with the Dow moving within a 200-point range. In the last half-hour of trade, stocks surged on Greek news, putting the S&P 500 above 2,000 points in the close and the Dow up nearly 200 points. The jump encouraged most analysts.
"I want to make sure momentum stays positive," Ablin said. "If momentum breaks down in the U.S. market, we need to raise cash." That could mean taking some money off the table in order to increase cash holdings to 10 percent from zero percent, he said.
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"My concern is we are overvalued. The best thing we could see is higher revenue," Ablin said.
So far, earnings have largely disappointed, with major firms missing already low estimates as the plunge in oil prices and the strong dollar hurt multinationals' revenues.
"Market valuations are stretched," said Bruce Bittles, chief investment strategist at R.W. Baird & Co. "The growth rate of earnings (is) coming down significantly."
Perceptions of an improving U.S. economy have also resulted in less-than-expected pessimism in the market, Bittles said.
Tuesday's factory orders could further demonstrate the challenges that U.S. companies face from the stronger dollar, Ablin said.
The monthly measure of new orders for U.S. factory goods is expected to show a 2 percent decline in December, after a 0.7 percent decline in November, according to analysts polled by Reuters.
On Monday, ISM manufacturing figures came in weaker than expected for January. The disappointment sent the Dow Jones Industrial Average briefly down 120 points before the index recovered.
Analysts noted that the report indicated slowing, not negative, growth.
"The U.S. ISM was pretty good, still positive," said Douglas Cote, chief market strategist at Voya Investment Management. He sees resilience in the U.S. market and is optimistic on long-term earnings trends.
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"You have to look at the general accommodative stance around the world and low bond yields; you want to be in this market," he said. "You want to be an investor because corporations want to find a way to make money in this environment."