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Alcoa's Miss Not Yet a Strikeout for Earnings Season

The first major fourth quarter earnings report was a swing and a miss.

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Alcoa, a Dow component, saw its shares fall sharply in the after hours session after it reported a profit of $0.01 per share, excluding items, below the $0.06 expected by analysts. The company reported a loss of $0.28 per share or $277 million on a net basis, still disappointing but way better than the $1.49 per share or $1.19 billion lost the year earlier.

"I think it's tough to say Alcoa will lead the market, per se," said Cowen's John O'Donoghue. "I think you're going to get down to brass knuckles of how each management team runs their business in each specific industry."

Alcoa said free cash flow turned positive for the first time since second quarter, 2008. In the fourth quarter, aluminum prices rose by 9 percent but that was offset by higher energy prices and the weaker dollar.

There is just a trickle of earnings news this week, before the earnings season gets underway next week. Two other Dow components report later in the week. Intel reports on Thursday, and J.P. Morgan releases results on Friday. Chevron warned Monday that its fourth quarter results would be sharply lower than the third quarter because of a further deterioration in refining margins.

Analysts expect S&P 500 earnings per share growth of 8 percent, excluding the financials, according to Thomson Reuters. If the financials are added in, that number balloons to more than 180 percent because of their huge losses in last year's fourth quarter.

Tuesday's earnings reports include KB Homes and Supervalu. Also expected Tuesday are the NFIB release of its monthly small business optimism survey. The November trade balance is reported at 8:30 a.m.

J.P. Morgan chief U.S. equities strategist Thomas Lee said, in a recent interview, that topline growth should be positive for many companies in the fourth quarter. "In Q1, we're going to have 8 percent topline growth for the S and P, but I think for the fourth quarter, it will be most companies will have positive top line growth," said Lee.

O'Donoghue, who heads equities trading at Cowen, said he does expect some earnings surprises this quarter and tech is a good place to look for them. "Tech has no debt on their balance sheets. They are lean and mean and any pick up in end user demand will drop into their bottom line very quickly," he said.

The Dow Monday rose 45 to 10,553 and the S&P rose 2 to 1146. The best performing S&P sector was industrials, up 1.2 percent, led by Caterpillar which soared on heavy volume. Utilities were second best, with a gain of 1.1 percent. The worst sectors were tech, down 0.4 percent and materials, down 0.2 percent. Financials were 0.3 percent higher. Reports that the Obama Administration could levy a new tax on the financial industry dampened enthusiasm for the sector during the trading day.

On Tuesday, Treasury plans to auction $40 billion in 3-year notes at 1 p.m.. Another $21 billion in 10-years is auctioned Wednesday, and $13 billion in 30-year bonds are auctioned Thursday.

"Tomorrow should be pretty smooth sailing into the auctions," said George Goncalves, Treasury strategist at Cantor Fitzgerald. Treasurys were mostly higher Monday, as the auction of $10 billion in (10-year TIPS) government inflation-protected bonds also went well. The 10-year TIPS had a bid to cover ratio of 2.65.

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— Questions? Comments? marketinsider@cnbc.