Earnings may keep stocks rally alive

Stocks wrapped up their first week of the fourth quarter by touching record highs, and the potential for profits to beat reduced expectations as results start coming in next week may keep the rally alive.

The Dow and the S&P 500 surged to all-time intraday highs on Friday after a solid employment report rekindled optimism about the U.S. economy and corporate profits. The S&P 500 also closed at a record high.

Friday's record run-up cemented the market's recovery from a late summer sell-off, when a credit squeeze and mounting housing market losses drove investors away from equities. Even so, third-quarter earnings will likely top investor concerns in the coming week.

Alcoa Inc (AA.N: Quote, Profile, Research), the world's biggest aluminum maker, takes its traditional spot as the first major company -- and the first Dow component -- to report, with results after the close of trading on Tuesday.

Other companies reporting in the week include Costco Wholesale Corp (COST.O: Quote, Profile, Research), Monsanto Co (MON.N: Quote, Profile, Research), PepsiCo Inc (PEP.N: Quote, Profile, Research) and Safeway Inc (SWY.N: Quote, Profile, Research).

"The bar is quite low right now. It's not difficult to beat them," said John Praveen, chief investment strategist at Prudential International Investment Advisors LLC, referring to forecasts of 2 percent to 3 percent increases.

He noted that the forecasts were in a range of 5 percent to 6 percent a few weeks ago, but have come down dramatically amid the worries about a credit crunch and losses tied to subprime mortgages.

The economy added more jobs in September than economists had expected, while an earlier estimate of job losses in August was revised to a gain, quashing fears of recession

Earnings may keep stocks rally alive

10/6/2007 8:59:51 AM