Investors are about to get some of the economic data they've been craving — from the country's big corporations.
Hundreds of earnings reports from the April-June quarter will begin flowing in this week, helping investors answer questions about how soon the economy will start growing. With the economy not gaining momentum after some early signs of recovery, investors are worried that they bet too soon on a rebound during the market's spring rally.
The early part of the rally came as data showed the pace of the economy's slide was slowing. But the euphoria has given way to a realization that just because the economy isn't collapsing, it isn't necessarily going to shift into growth anytime soon.
No one expects any obvious signals, such as a sudden pop in corporate profits. Instead, investors will pore over companies' forecasts.
"Investors are hungry for a sense that things have turned, or are about to turn, and want to see some validation of that," said Michael Cuggino, president and portfolio manager at Pacific Heights Asset Management in San Francisco.
"What's going to be most important is what companies are saying about their own businesses and industries, in terms of activity, outlooks," he said.
Without some upbeat predictions, stocks could extend a monthlong retreat. The Dow Jones industrial average on Friday closed at 8,147, its lowest level since April 28. The blue chips have fallen 7.4 percent in four weeks, the longest slide since stocks bounced off 12-year lows on March 9 to rally 40 percent.
Brian Singer, chief investment officer at Singer Partners in Winnetka, Ill., doesn't expect the reports this week to offer many answers because the economy is likely to recover so slowly it will be difficult for companies to show much conviction even if they do forecast better days.
He expects the uncertainty will hold the stock market to a slow comeback. The Dow is still down 42.5 percent from its peak of nearly 14,165 in October 2007.
"It's going to be a market that kind of muddles its way up," Singer said.
Stocks could still stall even if earnings turn out to be better than expected, as they were in the first quarter. That's because most earnings will still be down sharply from a year ago.
Analysts polled by Thomson Reuters expect that average profits for the companies that make up the Standard & Poor's 500 index will fall 35.5 percent from the second quarter last year. And as they did in the first three months of the year, many companies will rely on cost cuts to generate earnings.
Carving out profits by slashing expenses can work for a while, but not indefinitely. At some point investors will need to see that companies can increase earnings by bringing in more revenue.
But boosting the top line could be difficult for businesses, particularly those reliant on consumers, whose spending makes up more than two-thirds of U.S. economic activity.
Analysts say a recovery won't come as quickly as it did after the tech-stock implosion at the start of decade.
Home prices in the hardest-hit markets are still down by more than half and many consumers have been cut off from the easy credit that once nourished the economy. Analysts warn it will be a long time before consumers' once inexhaustible spending will be able to fill corporate coffers.
And with unemployment at a 26-year high of 9.5 percent, even those consumers without financial troubles are likely to remain cautious.
Still, most analysts don't expect the stock market to return to the lows of early March, when the Dow plunged to 6,547. Investors are instead trying to determine how to value stocks if the economy does take years to recover.
Beyond earnings reports, other economic data could direct the markets this week.
The National Association of Home Builders releases its housing market index for July on Thursday. And on Friday, the Commerce Department will post numbers on housing starts for June.
Snapshots of retail sales and industrial production for June are also due. And the Labor Department will release its June producer price and consumer price indexes.