updated 4/5/2009 2:33:41 PM ET 2009-04-05T18:33:41

Enthusiasm over government programs aimed at breaking a logjam in bank lending has become the key driver of the market's recent surge. But that could take a back seat in coming weeks as investors return to their bread-and-butter indicator: quarterly earnings data.

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Coming off a nearly 12-year low in early March, the Dow Jones industrial average just wrapped up its best four-week run since 1933. A shift from fear to hope has largely been propelled by policy initiatives and some corporate news, such as bank executives saying their businesses were profitable in January and February.

But as investors' focus shifts, so might momentum. This week they'll begin poring over first-quarter earnings results to see if anything has improved. Aluminum producer Alcoa Inc. is set to kick off first-quarter earnings season on Tuesday with a quarterly loss.

The current rally will only last if companies show some improvement in quarterly results. Disappointing results, especially in key sectors such as banking and retail, would likely kill market momentum.

The banking sector, which has been a culprit in the economic downturn and the focus of so much recent government intervention and support, will be closely monitored.

Investors will want to know if executives' comments last month about their banks operating profitably in January and February continued into March. An increase in lending by banks would also provide further evidence that the economy might be on the rebound.

Any improvement among retailers' quarterly earnings would also likely push a rally. Consumer spending has been anemic during the ongoing recession and improvement in earnings would be a welcome sign.

Investors will get a glimpse at how retailers are performing this week when March sales reports are released on Thursday.

While earnings come into focus, investors will continue to monitor economic data, even though its role in propelling the market has been somewhat muted recently.

One reason lagging economic indicators have become less influential on the market is that investors are already discounting them since they are so often expected to be weak. When they fall close to expectations, investors are often unfazed.

Case in point: the monthly Labor Department report released Friday. The unemployment rate jumped to 8.5 percent, the highest level since 1983. Employers also cut 663,000 jobs from payrolls, but since the number was so close to expectations the market largely ignored it.

"People expected unemployment was going to be bad, so it softens the blow," said Mike Rubino, president of Rubino Financial.

That's not to say the market hasn't been responding to economic data. Just last week, the market scored gains with the help of a rebound in pending home sales and improving manufacturing activity.

This week a key reading from the Commerce Department on wholesale inventories will likely be the biggest economic driver of trading. Otherwise, there's little data being reported this week.

The report due out Wednesday is expected to show businesses reduced inventories for a sixth straight month in February, but a better-than-expected result is not out of the question.

"Wholesale inventories will probably show some improvement," Rubino said. If they do, he said it might fuel the current market surge.

The Federal Reserve will also release minutes from its March meeting where it decided to inject more than $1 trillion into the economy. The Fed's spending program was another government initiative that helped jump-start the markets last month.

Last week the market was bolstered by news that an accounting standards board loosened rules to give beleaguered banks more leeway in determining prices for the risky assets they hold.

Ironically, that could put a damper on the government's recently announced public-private partnership aimed at buying up the risky assets. If banks don't have to slash the value of the assets as much as under old accounting rules, they might opt to hold them instead of sell them to other investors.

The government plan is part of a myriad number of programs being put in place. The amount of money being pumped into economies worldwide is also providing support against future drops, said Will Muggia, president and chief executive of Westfield Capital Management and co-manager of the Touchstone Mid Cap Growth Fund.

"The amount of stimulus piling up is incredible," Muggia said. "It's almost more important than economic data coming out."

That government support is the reason a rally is more sustainable now than it has been during the ongoing credit crisis and recession, he said. It also increases investors appetite for risky assets, which provides more support for stocks to rally.

During the week, the Dow gained 3.1 percent, rising to 8,017.59. The Standard & Poor's 500 index gained 3.3 percent, rising to 842.50. The Nasdaq composite index gained 5 percent, rising to 1,621.87.

Markets will be closed Friday for the Good Friday holiday.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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