"As we get away from mid-year, the focus will be away form Q1 and Q2 to what does 2011 look like. We know at the end of the year the Bush tax cuts expire," he said.
"There's going to be at some point, as we move towards summer, where the focus is on the midterm election," he said. He also said if Treasury yields continue to drift higher, that could begin to be a dampener for stock performance.
But for now, he says the stock market can continue to rise. "I don't think investors have believed. I think they've been fairly skeptical because they worry about all these big issues. We're starting to see a kind of grudging acceptance. If the hedge funds are covering shorts, they're feeling performance pressures, and they're being dragged in by retail companies telling us business is okay, and by industrial manufacturers telling us sales will be up.
They're kind of being pulled into it. I think some of the skepticism is starting to diminish. They are starting to believe grudgingly, as opposed to believe wholeheartedly," he said.
Levkovich said he expects the earnings comments from companies to also be very positive this quarter.
Keon said companies that have a large exposure to Europe may see a hit from the decline in the euro in the first quarter, but that should be largely balanced by gains by other currencies in emerging markets and Canada.
Sectors that should show the best outperformance include technology, consumer discretionary, and energy companies, due to higher oil prices, he said.
The S&P 500 is expected to show average revenue growth of 10 percent, a level last seen in second quarter, 2008, according to Thomson Reuters data. Revenue growth in the fourth quarter was a better-than-expected 8 percent.
The energy sector is expected to see the best revenue growth, with a 33 percent increase. Materials sector revenues are expected to be up 20 percent, and technology is seen up 16 percent. Consumer discretionary revenues are expected to rise 11 percent. Telecoms are expected to see flat revenues, and industrials and financials are expected to show just a 1 percent gain, according to data provided by Thomson Reuters.
Profits for the S&P 500 are expected to rise by 37 percent, led by sharp gains in financials, materials and consumer discretionary companies. Without the financials, S&P 500 earnings are expected to be 27 percent higher.
The earnings calendar contains some heavy hitters, but it is still relatively light this week. Earnings are expected from Alcoa, after the bell Monday. Intel and CSX report Tuesday. JPMorgan Chase and Yum Brands report Wednesday. PPG, Google, and AMD report Thursday, while Bank of America, GE, Gannett and Mattel report Friday.
Economic reports in the coming week include international trade and import prices Tuesday. The NFIB small business survey is also released that day. On Wednesday, there's CPI, business inventories, and the Fed's Beige Book, in addition to retail sales. Thursday's data includes weekly jobless claims, the Empire State survey, Philadelphia Fed survey, industrial production, and the Treasury's international capital flow data. The National Association of Home Builders survey is released Thursday. On Friday, there are housing starts and consumer sentiment.
The Fed is out in force in the coming week, with a multitude of speeches from many of the regional bank presidents. Besides his testimony before the Joint Economic Committee Wednesday, Bernanke speaks Tuesday evening in Washington. Richmond Fed President Jeffery Lacker speaks on the economy Tuesday and again on Wednesday, and then on Thursday at the Credit Markets Symposium in Charlotte.
Fed Governor Daniel Tarullo speaks Tuesday at the Council of Institutional Investors Meeting. Fed Governor Kevin Warsh speaks Wednesday at the Levy Economics Institute of Bard College Minsky Conference in New York. Cleveland Fed President Sandra Pianalto speaks at the same conference Wednesday, and St. Louis Fed President James Bullard speaks there Thursday. Kansas City Fed President Thomas Hoenig speaks there Friday, as does Warsh.
San Francisco Fed President Janet Yellen is speaking to Financial Executives International in San Francisco Thursday on the outlook, and Atlanta Fed President Dennis Lockhart speaks in Pensacola on the outlook Thursday. Dallas Fed President Richard Fisher speaks on the financial crisis in Washington Thursday.
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