The stock market could soon switch off its myopic focus on Washington, and instead home in for a while on what could be the best corporate earnings and revenue growth in five-and-a-half years.
The mood among some traders soured last week after the White House and Congress failed to come together on a new health-care plan. But analysts say the market's underpinnings are strong, and that should give Washington time to work out a plan for what stocks really want to see — tax reform.
The earnings season doesn't start until mid-April, but analysts are looking forward to a very strong performance. The S&P 500 earnings, as of now, are expected to rise 10.4 percent, the best year-over-year gain since third quarter, 2011, when earnings grew 18 percent, according to Thomson Reuters. Revenues are expected to be up 7.1 percent, the best growth since the 11.1 percent jump in that same quarter of 2011.
"We probably have a couple of weeks of numbers that are going to be coming out, and that will serve as a sufficient distraction away from focusing on the fiscal front … then it becomes a very much show-me situation," said Mark Luschini, Janney Montgomery chief investment strategist. He said the market will want to see some signs of progress, but if there's another failure, all bets are off. "If we're not going to get the windfall from corporate tax reform, the question is what drives us from here."
Even with earnings on the horizon, the markets will pay attention to the headlines from D.C. since Republicans reportedly could try another vote on replacing Obamacare next week.
"I think it's still about earnings. It's still about fundamentals, but investors are just reacting to whatever happens," said Tobias Levkovich, chief U.S. equity strategist at Citigroup.
"We're about to break out to the positive side. Actually we have not been in an earnings recession. We've been in an energy depression and we're coming out of it. Ex-energy, there was only one quarter in the last three years that earnings were down," he said. Levkovich said the earnings were down 1.5 percent, excluding energy, in the first quarter of 2015 because of dollar strength. Last quarter, S&P profits rose 8 percent, the best pace since the third quarter of 2014, when earnings grew 10.3 percent, according to Thomson Reuters.
Besides Washington headlines, investors Thursday will have initial jobless claims and the final look at fourth quarter GDP, both released at 8:30 a.m. ET.
There are also three Fed speakers on the calendar. New York Fed William Dudley is expected to be the most important, with a 4:30 p.m. ET discussion on financial conditions and monetary policy. San Francisco Fed President John Williams speaks at 11 a.m., while Dallas Fed President Robert Kaplan speaks at 3 p.m. in New York.
Watch: Wall Street trying to focus on earnings