Investors will have seen enough corporate results by the end of the week to determine if the recent string of encouraging earnings was an anomaly or a real sign stocks can weather the credit crisis and economic slowdown.
If the market in the next five sessions manages to match last week's gains, it could put the Dow in positive territory for the first time this year.
All three major indexes ended the week up more than 4 percent, with the Dow posting its best week since February.
The Dow and the S&P 500 each ended the week up 4.3 percent, while the Nasdaq ended 4.9 percent higher.
"I think for the market to extend these gains it would have to have more comfort that the earnings are moving up and consumer cycle has bottomed out," said Subodh Kumar, chief investment strategist, Subodh Kumar & Associates in Toronto. "This week the S&P 500 has gone below my fair value calculation of 1,350 to slightly above."
Last week's swift advance was powered by financial sector quarterly results that suggested banks have done a thorough spring cleaning, leading Wall Street to believe they purged their balance sheets of any trace of subprime exposure.
"We're not out of the woods," John Forelli, senior vice president, Independence Investment LLC, said, noting that upcoming results will be key.
"The earnings can continue to come out fairly strong but the news won't be that ebullient. There will probably be more write-offs, and you're going to have a fair amount of companies doing layoffs," he said. "The financials are the ones that are the key as far as getting confidence back in the market."
All eyes will be trained on Bank of America on Monday when the No. 2 U.S. bank reports earnings. Expectations will be running high after Citigroup , the top U.S. bank, and No. 3 bank JPMorgan Chase delivered results this week that pleased Wall Street and sent their shares up more than 5 percent.
Other key earnings announcement from the financial sector include CME Group, operator of the Chicago Mercantile Exchange and the Chicago Board of Trade, on Tuesday and credit card and travel services company American Express on Thursday.
Investor sentiment about global growth improved this week after several U.S. blue chip companies said robust overseas sales drove positive earnings results, reflecting strong demand overseas and the benefit of the weak dollar when overseas sales are converted into dollars.
"The real story will be strength in the global economy continuing to give a lift to companies like we saw this week with Caterpillar , Honeywell and IBM , said Fred Dickson, market strategist, director of retail research, D.A. Davidson & Co.
Investors will be watching for similarly strong foreign sales from oilfield services firm Halliburton , mobile phone chip maker Texas Instruments, diversified manufacturer 3M, jet maker Boeing and soft drink company Pepsico .
The housing market will be in the spotlight next week with figures on tap for sales of both existing and new homes.
Sales of existing homes, due on Tuesday, are forecast to have slowed on an annualized rate, while new-home sales are seen having picked up slightly.
Several earnings reports from home builders will give investors another gauge of the housing sector. Data released earlier this week showed builder sentiment hovering near all-time lows in April.
No. 3 builder Pulte Homes and smaller rival Ryland report earnings on Wednesday. M.D.C. Holdings, the No. 10 home builder, reports results on Thursday.
While the earnings outlook has improved this week, concern about the health of the U.S. consumer is still running high and could pose an obstacle to the market's recovery.
This week crude oil reached a record of $116 a barrel and U.S. rice futures soared, sparking worries that global turmoil over food prices could lead to panic buying, sending prices higher still.
The final reading of April's Reuters/University of Michigan Surveys of Consumers, due on Friday, will show whether higher food and fuel costs and the shrinking job market have made shoppers more pessimistic.
The survey's preliminary April reading showed confidence dropped to its lowest level in more than a quarter century.