Financials and techs, two groups that pulled in the money last week, will be out in front of the news this week when earnings season is in full swing.
Markets will also be watching key economic data, a parade of Fed speakers and whatever side show goes on when oil markets reopen, after last week's near six percent slide in crude.
Stocks ended the week with the Dow at a record, and the Nasdaq and S&P at six-year highs. The Dow rose 1.3 percent on the week, Nasdaq was up 2.8 percent, and the S&P 500, up 1.5 percent. Selling subsided in commodities-based companies toward the end of the week, and the S&P materials group was the leading sector with a 2.9 percent gain, followed by tech, up 2.7 percent and consumer discretionary, also up 2.7 percent.
Financials were up 1.2 percent for the week after a one percent pop Friday. Energy was down nearly one percent, after it rebounded 2.5 percent Friday ending a week of selling. Airlines were also big movers on the dip in oil and takeover talk.
EARNINGS CENTRAL: Traders tell us a lot of investors were making long bets ahead of earnings reports this week. I asked our Maria Bartiromo what she's hearing about earnings, and she thinks we'll see double digit growth in fourth quarter profits. She also says the market could be responsive. "By and large, this economy is so vibrant," says Bartiromo. "Things are going so well. There is still a lot of liquidity out there. Money is moving into this market."
Earning reports will pour out Tuesday morning before the bell. That day we will see results from Wells Fargo , Freeport-McMoran ,Forest Labs and a late day report from Intel . On Wednesday, we will see results from JPMorgan , Apple , AMR and Washington Mutual .
Thursday looks to be the busiest earnings day of the week. Companies expected to report then include Pfizer ,Motorola ,Continental Airlines , Unitedhealth , Merrill Lynch , and Novartis . Friday's big names are Citigroup and General Electric , the parent of CNBC.
FOREIGN CORRESPONDENT: Our Michelle Caruso-Cabrera is in Venezuela and will bring us live reports Tuesday on what's happening in that country. President Hugo Chavez unnerved investors last week when he moved to nationalize companies in telecom and utilities (see link for full background), which had American companies among their owners. This weekend, Chavez met with Iran's President Mahmoud Ahmadinejad and the two vowed to support a cut in world oil supplies to bring up prices. Chavez also said this weekend that Venezuela's entire energy sector has to be nationalized but he said foreign firms could hold minority interests in oil deals. Oil traders will certainly be watching this situation. "Hugo Chavez is the most enigmatic figure in the world today. He wants to be the next Castro, and he has the personality and the power --because of the oil his country sits on," said Caruso-Cabrera.
"We'll examine the risks American businesses and the American economy face as Chavez marches toward socialism," she said.
WATCHING BERNANKE: Fed Chairman Ben Bernanke testifies before the Senate Budget Committee Thursday on the long term fiscal challenges facing the U.S. The hearing starts at 10 a.m. and should last for several hours. Bernanke will be closely watched for any comments on economic direction and Fed thinking. "I think Bernanke has a self-imposed gag on his mouth. The guy doesn't want to talk about anything, and frankly I can't blame him," says our Rick Santelli.
Other Fed speakers include San Francisco Fed President Janet Yellen speaking Wednesday in Arizona at 2:40 pm. and St. Louis Fed President William Poole who speaks later that night in St. Louis. Cleveland Fed President Sandra Pianalto speaks on the economy in Ohio at 8 a.m. Thursday and Richmond Fed President Jeffrey Lacker speaks on the economic outlook in Virginia Friday at 8 a.m. St. Louis Fed President Hoenig speaks on the economy later that afternoon in Kansas City.
INSPIRING DATA: Our Steve Liesman's been saying that the data is showing the economy to be stronger than many expect it to be. Well, that better than expected December retail sales number Friday apparently thrilled some economists enough to get them to push up their Q4 GDP forecasts. Both Goldman Sachs and Lehman raised their expectation to 3.3 percent from 2 percent.
"If these forecasts are right, this will be the first fourth quarter with higher GDP than third quarter since the recession year of '01" says Santelli.
"Can it last?" asks Lehman Economist Ethan Harris in his report. He points out the data could be distorted but says there's a case for more strength into the first quarter, not less, from patterns such as the plunge in energy prices, gift cards (they kick in when spent), unusually warm weather, even the introduction of the new Microsoft Vista operating system. He notes the improvement in trade doesn't seem sustainable and the surge in government spending is probably just temporary.
Down the street at Merrill Lynch, David Rosenberg has been seeing some surprising strength rolling into first quarter since last month, and he published a report at the week's end citing some of the same reasons Harris saw for an upside surprise in Q1. He also says the Q1 blip is influenced by non-recurring factors so his growth scenario for the second and third quarter should be weaker. But important to the stock market is his comment on what it could mean to perceptions about the Fed. He says it changed his forecast to a Fed ease in June rather than March.
For those of us without crystal balls, there's a lot of data Wall Street's traders will be sorting through this week once they return from the three day Martin Luther King holiday weekend. First, the Empire State manufacturing survey is released Tuesday at 8:30 am. Inflation data, some of the most anticipated data of the week, is released Wednesday when producer prices (PPI) come out and Thursday when consumer prices (CPI) are released.
The NAHB housing market index is released at 1 pm Wednesday, and housing starts and building permits come out Thursday. The Fed's Beige Book is expected at 2 p.m. Wednesday, the Philly Fed survey is Thursday at noon, and University of Michigan consumer sentiment for January is reported Friday.
CRUDE REALITIES: The seesawing in energy markets that's coming from oil's big sell off is likely to continue for a bit, according to several analysts we interviewed last week. Some think there will be a fall of at least several dollars per barrel before the trend turns. Of course, there is the talk coming from OPEC this weekend about a possible emergency meeting and a shift in prices may depend on what is happening in the world, despite the fact that oil has been ignoring global political trends of late. See CNBC.com reporter Christina Cheddar Berk's story on speculative money leaving the oil market on CNBC.com. "CNBC: Plunge in Oil Prices Flushes Out Speculators"
Thanks to Lehman's note on growth, we found some interesting observations from Harris on the economic impact of oil that are worth sharing. He says the standard simulation result from a $10 drop in oil prices adds about "0.4 percent to GDP growth for a two year period...since 2003, there has been a strong correlation between energy prices and consumption one quarter later. According to US Economics model, the drop in oil prices from the high 70s to the low 60s in August and September added more than a percentage point to consumption in Q4.