Earnings and oil prices will challenge the stock market rally again on Tuesday.
The major U.S. averages closed at 2016 highs on Monday, with the Dow Jones industrial average jumping 106 points to close above 18,000 for the first time since July 20. A key support for stocks Monday was a recovery in oil prices, which settled well off lows despite no agreement on an output freeze at a Sunday meeting in Doha, Qatar.
"The market survived Doha and lower oil, and (the question is) will it be able to absorb Netflix and IBM, which have been two key stocks driving the rally," said Scott Redler, chief strategic officer at t3live.com.
"I think to get any kind of traction above 18K, you need earnings not to disappoint," he said, also noting guidance needs to remain encouraging.
Netflix reported earnings per share that beat, but the streaming company missed on revenue and gave lower-than-expected guidance for subscriber growth in the second quarter. Shares are down more than 5 percent for the year so far and plunged more than 10 percent in after-hours trade.
IBM reported earnings that beat on both the top and bottom line, although total revenue declined 5 percent from the same period last year. Ex-currency changes, revenue still fell 2 percent year over year.
The firm maintained expectations of full-year operating (non-GAAP) diluted earnings per share of at least $13.50.
The stock, which is up more than 10 percent year-to-date, reversed initial gains to trade more than 2 percent lower in after-hours trade.
"Despite earnings per share significantly exceeding estimates, IBM did not raise guidance, it actually maintained its outlook," said Scott Kessler, deputy global director of equity research at S&P Global Market Intelligence, which has a "hold" rating on IBM.
He noted other factors behind the declines in the stock in after-hours trade were likely due to the decline in revenue and consolidation after recent gains.
Another Dow component, Goldman Sachs, is due to report ahead of Tuesday's open.
"Goldman might be the most interesting one to me tomorrow morning, because trading has taken such a hit at some of these financials, and they're really reliant on it," said JJ Kinahan, chief strategist at TD Ameritrade.
Other morning reports are expected from Johnson and Johnson, UnitedHealth, Kansas City Southern, Northern Trust, TD Ameritrade, Harley-Davidson, MGIC Investment and Comerica. Intel, Yahoo, Discover Financial, Intuitive Surgical, Interactive Brokers and VMWare report after the close.
Economic news is light Tuesday, with housing starts and building permits for March scheduled for morning release.
Ryan Sweet, director of real-time economics at Moody's Analytics, is watching the trend in the data over the last few months.
"The mix is still leaning towards multi-family, which packs a smaller GDP and employment punch," he said.
With Monday's gains, the and Dow are both within 2 percent of their 52-week intraday highs.
"For this week, things I'm looking for is how much longer this strike goes on in (Kuwait), taking some production off. If that does get settled, then you may see production come back on," said Terry DuFrene, global investment specialist at JPMorgan Private Bank in New Orleans.
He noted that his clients in the region have not bought any of oil's recent rally.
U.S. crude oil futures for May delivery settled down 58 cents, or 1.4 percent, at $39.78 a barrel on Monday, after plunging more than 6.5 percent overnight. The May contract rolls to June after the settle on Wednesday and could see volatility leading into that.
"If oil kind of hangs in and we continue to have some better-than-feared earnings reports as we saw [in] the financials last week, the market may be able to hang on," said Art Hogan, chief market strategist at Wunderlich Securities.
The S&P 500 gained 13.6 points to close at 2,094.3 with energy leading all 10 sectors higher.
The correlation between S&P 500 futures and U.S. crude oil futures remained a high 86 percent Monday afternoon, Kinahan said.