Where’s the Long Awaited Market Correction?

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With U.S. economic optimism rising and the Fed money spigot wide open, turmoil in Cyprus didn't spark a major correction in stocks. Could lackluster earnings do the trick?

"Every time this market corrects even slightly on this negative news, the powerful combination of better economic statistics in the U.S., and the never-ending Fed ease kind of brings buyers back in," Ben Pace, chief investment officer for Deutsche Bank Private Wealth Management, told CNBC this week.

The recent economic data has indeed been more encouraging — whether it's a better jobs report, a building recovery in housing or improvements in manufacturing.

(Read More: Are Markets Too Complacent Over Cyprus?)

"I think that we'll be moving into a period where the surprises are likely to be on the upside, not the downside driven by housing, oil and gas, manufacturing, the end of household deleveraging, a more buoyant consumer and more deficit reduction at the federal level than people are expecting," Evercore Partners' Roger Altman said in a CNBC interview.

And he said the rise in markets is reflecting a brighter economic outlook. Moreover, if the Federal Reserve actually started to withdraw some of its stimulus at the end of the year or early next year, that "would be consistent with the transition in economy that we're talking about here," Altman said.

(Read More: Scenes From the Cyprus Crisis)

On tap next week are a range of economic reports giving insight into the housing market, manufacturing and the health of the consumer. Data include new home sales, home prices, durable goods orders, the Chicago purchasing managers index, consumer sentiment and personal income and spending.

A slate of Fed officials, including Chairman Ben Bernanke, will also be speaking throughout the week.

Pivot to Earnings

With the quarter ending next week, investors' attention will soon turn to corporate profits. And after a few shaky reports from FedEx and Oracle, it may be a more challenging season than investors realize.

"I think the key question looking forward here in everybody's mind is not Cyprus, it's not Washington, it's earnings," Richard Bernstein of Richard Bernstein Advisors said. He said investors should be worried about the impact of the strengthening dollar on the earnings of big U.S. multinationals.

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"When we know emerging market growth has been weak, we know the dollar has been strong, large company earnings, the big multinationals that everybody has loved, their earnings may come under some pressure here," he said.

David Lefkowitz, a strategist at UBS Wealth Management, pushing markets higher from here will be "more about earnings growth."

He said investors should be focused on those cyclical sectors that can grow earnings — technology, materials and industrials. "They are all going to benefit from the pickup in economic activity that we're seeing both here and abroad."

(Read More: Forget Large-Caps, Why Small-Caps Are Better)

In the tech sector, both BlackBerry and IT consulting firm Accenture will be reporting earnings on Thursday.

"Profits are going to call the tune," David Darst of Morgan Stanley Wealth Management told CNBC. "If you have difficulty in the profits, the market is going to sell off. So profits, wages, structural reform are the things you need to see to get us to the promised land of higher numbers on the S&P 500."

— By CNBC's Justin Menza