updated 10/9/2006 11:34:40 AM ET 2006-10-09T15:34:40

Earnings season begins in earnest in the coming week and many investors will be poring over profit reports to gain a sense of whether last week’s record-setting run in stocks will continue.

Major Market Indices

Earnings, and perhaps more important, profit forecasts, will be at the front of investors’ minds as they try to glean whether the economy is slowing too quickly as some fear or whether the Federal Reserve’s course of rate hikes and pauses will allow growth to slow but continue.

Investors tossed aside many of their concerns about the state of the economy for much of last week and sent the widely followed Dow Jones industrial average to three straight record closes, giving the index a 1.47 percent increase for the week. This came despite a lower finish for the Dow Friday triggered by a disappointing employment report. While the record-setting was limited to the 30-stock blue chip index, the Standard & Poor’s 500 index and Nasdaq composite index registered impressive gains as well, though they remain well off their highs.

Acquisitive investors will be eyeing their holdings to see whether they bet correctly in recent weeks as oil prices fell further from midsummer highs and as the notion took hold among some investors that the Fed could cut interest rates sooner than later. To keep inflation in check, the central bank raised short-term interest rates 17 straight times starting in June 2004 before standing pat at its last two meetings. Some saw a series of economic reports that showed a slowing economy as all the cover the Fed would need to justify cutting rates. Investors will be looking for insight into the Fed’s thinking with the planned release Wednesday of minutes from its last meeting.

While a slowdown could be good for those hoping for a rate cut, few stock market investors would want to see a falloff in profits. Alcoa Inc., a Dow component whose earnings report customarily marks the beginning of an earnings season, is scheduled to kick things off Tuesday.

While other big-name reports are due this week, investors will also have a smattering of economic data to chew on, including a Commerce Department on retail sales. Strong sales reports from individual retailers last week showed falling gas prices left consumers with more money in their pockets.

Economic data
On Tuesday, the Commerce Department is scheduled to issue its monthly report on business inventories. That could provide a closer look at the manufacturing sector, which has been shown to be weaker in various reports within the past month.

Wednesday brings the Fed’s meeting minutes as well as weekly data on crude oil inventories; a surprise increase pushed prices down and helped usher the Dow to its new highs last week.

On Thursday, the Fed plans to release its Beige Book, which summarizes regional economic activity. Also that day, the Commerce Department issues data on the country’s trade balance.

Then, on Friday, the Commerce Department issues the important report on retail sales. Wall Street will be looking at the key measure of consumer spending to help determine how much a decline in gas prices could the rest of the economy. Investors will also be looking at whether falling gas prices and stock market gains have given a boost to consumer sentiment, when the University of Michigan releases its preliminary report for October.

Aside from Alcoa, which is expected to earn 79 cents per share for the third quarter, Wall Street expects to hear from drug maker Genentech Inc., which is expected to turn in a profit of 50 cents a share.

On Wednesday, investors will get third-quarter reports from newspaper companies, including USA Today publisher Gannett Co.

Also due that day is a third-quarter report from Yum Brands Inc., the parent of the Taco Bell, Pizza Hut and KFC fast-food chains.

On Thursday, investors will hear from more names that are well known by consumers, including Costco and PepsiCo.

Safeway Inc., the food and drug retailer, is scheduled to release third-quarter results the same day.

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